Florida Statutes — Life and Annuity (incl. Variable Products) — practice questions

18% of the exam ≈15 real questions 21 free questions here

Florida's rules on marketing, disclosure, replacement, annuity best interest, contract provisions and group life: 15 of the 85 scored questions, every one of them state-specific.

Where people lose points

• Life free look is 14 days in Florida; annuity free look is 21 days.
• The buyer's guide and the policy summary are separate disclosures with different timing.
• Divorce revokes a beneficiary designation naming the former spouse unless the policy or a court order says otherwise.
• A replacement needs the signed Form OIR-B2-312 sent in with the application.

Questions and answers, explained

All 10 questions above, with the correct answer and why it is correct. Everything here is on florida statutes — life and annuity (incl. variable products).

1. Under Florida law, an individual life insurance policy delivered in the state must give the policyowner an unconditional refund (free-look) period of at least how many days?

   • A10 days
   • B14 daysCorrect
   • C21 days
   • D30 days

   Why: Section 626.99(4), F.S., requires life insurance policies to provide an unconditional refund period of at least 14 days, during which the owner may return the policy for a full refund. The 21-day period applies to annuity contracts, and 30 days applies to Medicare supplement and long-term care policies — common distractors on this exam.

   Reference FL-II.A; s. 626.99(4), F.S.

2. Using misleading statements, an agent convinces a client to use the cash values of her existing whole life policy to buy a new policy from the SAME insurer, primarily to generate new first-year commissions. This prohibited practice is known as:

   • ATwisting
   • BRebating
   • CSliding
   • DChurningCorrect

   Why: Churning under s. 626.9541(1)(aa), F.S., is the practice of using policy values of an existing policy to purchase another policy with the SAME insurer, through misrepresentation or without a reasonable basis, primarily for the agent's benefit. Twisting, the closest distractor, involves misrepresentations that induce replacement of a policy with one from ANOTHER insurer (s. 626.9541(1)(l), F.S.).

   Reference FL-II.A; s. 626.9541(1)(l), (1)(aa), F.S.

3. Under Florida's best-interest standard for annuity recommendations (s. 627.4554, F.S.), an agent satisfies the standard by meeting all of the following obligations EXCEPT:

   • ACare — the recommendation must address the consumer’s needs
   • BDisclosure — the agent’s role and compensation must be stated
   • CConflict of interest — material conflicts of interest must be identified and avoided
   • DGuarantee of investment performance — the agent must promise a minimum returnCorrect

   Why: The four conduct obligations under s. 627.4554, F.S., are care, disclosure, conflict of interest, and documentation. The standard requires acting without placing the agent's or insurer's financial interest ahead of the consumer's — it never requires (or permits) guaranteeing investment performance, which would itself be a misrepresentation.

   Reference FL-II.A; s. 627.4554, F.S.

4. A client tells his agent he will simply stop paying premiums on his current whole life policy and let it lapse once his new policy is issued — no cash surrender will occur. The agent concludes replacement rules do not apply because nothing is being surrendered. The agent is:

   • ACorrect, because a replacement requires an actual surrender of the existing policy’s cash values
   • BIncorrect, because a transaction in which existing insurance will lapse is a replacementCorrect
   • CCorrect, as long as the new policy is written with a completely different insurer
   • DIncorrect, but only if the two policies happen to have identical face amounts

   Why: Under Rule 69O-151.002, F.A.C., replacement includes any transaction in which, because of the new purchase, existing life insurance has been or will be lapsed, forfeited, surrendered or otherwise terminated, reduced in value, or subjected to substantial borrowing. Allowing a policy to lapse is expressly within the definition, so the full replacement procedures (signed statements and the Notice Regarding Replacement) apply.

   Reference FL-II.B; Rule 69O-151.002, F.A.C.

5. A Florida resident dies owing substantial credit card debt. His life insurance names his spouse as beneficiary. What may the insured's creditors claim from the death proceeds?

   • AThey are paid first, before the beneficiary receives anything
   • BNothing — proceeds payable to a named beneficiary are exempt from the insured's creditorsCorrect
   • CUp to 50 percent of the proceeds
   • DThe full amount, unless the beneficiary was named irrevocably

   Why: Under s. 222.13, F.S., life insurance proceeds on a Florida resident inure exclusively to the named beneficiary and are exempt from the claims of the insured's creditors, unless the policy directs otherwise. The protection is lost when proceeds are payable to the insured's estate — then they become estate assets subject to creditor claims; the revocable/irrevocable status of the beneficiary is irrelevant to this exemption.

   Reference FL-II.C; s. 222.13, F.S.

6. A whole life policyowner can no longer afford premiums but wants to keep the policy's FULL death benefit in force for as long as the cash value will allow, without paying anything more. Which nonforfeiture option should she elect?

   • ACash surrender
   • BReduced paid-up insurance
   • CExtended term insuranceCorrect
   • DAutomatic premium loan

   Why: Extended term insurance uses the cash value as a net single premium to continue the policy's full face amount as term insurance for a limited period. Reduced paid-up, the closest distractor, keeps coverage for the insured's whole life but at a permanently reduced face amount; cash surrender ends coverage entirely, and an automatic premium loan still depletes value by paying premiums.

   Reference FL-II.C (nonforfeiture options); industry standard curriculum

7. An employer cancels its entire group life insurance policy and does not replace it. Employee A had been insured under the policy for 7 years; Employee B for 2 years. Under s. 627.567, F.S., who is entitled to convert to an individual policy?

   • AOnly Employee A, because conversion at policy termination requires at least 5 years of coverageCorrect
   • BOnly Employee B, because newer insureds receive priority
   • CBoth employees, because conversion rights never depend on length of coverage
   • DNeither employee, because conversion applies only to individual terminations

   Why: When the group policy itself terminates or is amended to end coverage for a class, s. 627.567, F.S., limits conversion to persons who were insured for at least 5 years before termination, and the convertible amount is capped (the smaller of the coverage lost minus any new group coverage obtained within 31 days, or $10,000). This differs from the individual-termination rule of s. 627.566, F.S., where an employee who leaves the job may convert regardless of how long she was covered.

   Reference FL-II.D; s. 627.567, F.S.

8. The Buyer's Guide and policy summary delivery requirements of the Florida Life Insurance Solicitation Law (s. 626.99, F.S.) do NOT apply to which of the following?

   • AAn individual 20-pay whole life policy sold to a Florida resident
   • BAn individual universal life policy sold in the applicant's home
   • CGroup life insurance issued to a Florida employerCorrect
   • DAn individual 10-year level term policy

   Why: Section 626.99(2), F.S., excludes from the solicitation requirements annuities, credit life, group life, life insurance issued in connection with ERISA pension and welfare plans, and variable life whose death benefits and cash values vary with a separate account. Individual fixed life policies (A, B, D) are all covered, regardless of plan type or where the sale occurs. Note the exclusion is only from the Buyer's Guide and policy summary duties — annuities still receive their own 21-day unconditional refund under s. 626.99(4)(b).

   Reference FL-II.A; s. 626.99(2), F.S.

9. An agent advises a client to surrender her existing whole life policy for its cash value and does not recommend any replacement product. Under s. 627.4553, F.S., before the surrender is executed the agent must:

   • AObtain the insurer’s written approval of the surrender and file a copy with the Office of Insurance Regulation within 10 days
   • BFile a replacement notice on Form OIR-B2-312 with the Office of Insurance Regulation before the surrender may be processed
   • CDo nothing, because the duty is triggered only when the agent also sells a new contract funded by the surrendered policy
   • DGive written information on the surrender charge, the guarantees and death benefit being lost, and tax consequences, and keep a dated copyCorrect

   Why: Section 627.4553, F.S., applies precisely when the agent recommends the surrender of an annuity or of a life policy with a cash value and does NOT recommend the purchase of another product; the agent must deliver the listed information in writing before the surrender is executed and must maintain a copy of the information and the date it was provided to the owner. Option C reverses the rule — the statute exists to close the gap the replacement rules leave open; Form OIR-B2-312 (B) belongs to replacement transactions in which new coverage is purchased, and it goes to the existing insurer, not to the Office.

   Reference FL-II.A; s. 627.4553, F.S.

10. An annuity contract issued to a Florida consumer age 65 or older may not impose a surrender or deferred sales charge on a withdrawal that exceeds what percentage of the amount withdrawn?

    • A5 percent
    • B7 percent
    • C10 percentCorrect
    • D15 percent

    Why: Section 627.4554(9), F.S., caps the surrender or deferred sales charge at 10 percent of the amount withdrawn for a senior consumer age 65 or older, and requires the charge to grade down to zero within the statutory period. Option B is the closest distractor because 7 percent is a common first-year charge in the marketplace, but it is a product design feature, not a Florida statutory cap.

    Reference FL-II.A; s. 627.4554(9), F.S.

Drill other domains

• Types of Policies and Features (Life and Annuities) (17.5%)
• Policy Riders, Provisions, Options and Exclusions (17.5%)
• Application, Underwriting and Policy Delivery (14%)
• Retirement and Other Insurance Concepts (9%)
• Florida Statutes and Rules Common to All Lines (24%)

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