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CFP
/ 512 /Testing /Questions /With /Correct /Answers
Which /of /the /following /statements /regarding /the /principles /of /risk /and /insurance /are /CORRECT?
/Risk /is / a /condition /in /which /there /is /a /possibility /of /an /adverse /result /from /the /expected /desired /outcome.
- / A /hazard /is /the /cause /of /a /financial /loss /and /is /the /actual /event /for /which /the /individual /purchases /insurance.
- /A /peril /is /a /condition /that /increases /the /probability /that /a /financial /loss /will /occur.
- /Pure /risk /involves /only /the /chance /of /loss /or /no /loss. /- /verified /answer(s)- ✔✔ 1 /and / 4 Risk /is /the /condition /in /which /there /is / a /possibility /of
/an /adverse /result /from /the /expected /desired /outcome. /A /peril /is /the /cause /of /a /financial /loss, /and / a /hazard /is / a /condition /that /increases /the /chance /of /financial /loss. /Pure /risk /is /the /risk /that /only /involves /the /chance /of /loss /or /no /loss. Which /of /the /following /statements /best /describes /a /morale /hazard? A) An /unintentional /tort /in /the /form /of /an /action /or /omission /that /leads /to /the /injury /of /another /party B) A /condition /of /carelessness /or /indifference /on /the /part /of /an /individual /as /to /whether /a /loss /occurs /and/or /the /size /of /a /loss /if /one /does /occur C) A /false /and /material /statement /made /by /an /applicant /for /insurance, /providing /a /basis /for /the /insurer /to /void /the /contract D) An /act /or
Which /of /the /following /are /methods /of /managing /risk? Avoidance Retention Reduction Transfer /- /verified /answer(s)- ✔✔ All /of /the /above All /of /these /are /risk /management /techniques. /Avoidance /and /reduction /are /methods /of /risk /control. /Retention /and /transfer /are /methods /of /risk /financing. Which /of /the /following /statements /regarding /self-insurance /by /a /business /is /CORRECT? The /organization /should /have /enough /homogeneous /exposure /units /to /make /losses /unpredictable. B) The /self-insurer /must /be /able /to /competently /manage /the /investment /of /the /self- insurance /fund. C) Self-insurance /is /a /method /of /risk /transfer. D) Most /firms /are /good /candidates /for /self-insurance. /- /verified /answer(s)- ✔✔ The /self- insurer /must /be /able /to /competently /manage /the /investment /of /the /self- insurance /fund. /Relatively /few /firms /are /good /candidates /for /self- insurance, /which /is /a /method /of /risk /retention. /The /organization /that /self-
insures /should /have /enough /homogeneous /exposure /units /to /make /losses /somewhat /predictable. Which /of /the /following /is /the /role /of /the /legislative /branch /in /regulating /the /insurance /industry /within /a /state? A) Passing /laws /relative /to /the /insurance /industry B) Creating /model /legislation /relative /to /the /insurance /industry C) Interpreting /and /applying /the /laws /in /place /relative /to /the /insurance /industry D) Enforcing /the /laws /in /place /relative /to /the /insurance /industry /- /verified /answer(s)- ✔✔ The /answer /is /passing /laws /relative /to /the /insurance /industry. /The /legislative /branch /votes /on /and
Legal /form B) Legal /object C) Legal /capacity D) Consideration /- /verified /answer(s)- ✔✔ The /answer /is /consideration. /Consideration /occurs /when /there /is /an /exchange /of /value. /The /insurance /contract /requires /an /exchange /of /value /to /be /legally /binding. /For /most /insurance,
/the /promise /to /pay /the /premium /is /usually /sufficient /consideration /to /make /the /contract /binding; /however, /for /life /insurance, /the /premium /must /be /paid /before /the /insurance /contract /is /binding /for /the /insurer. /The /submission /of / a /completed
/forgot /to /apply /her /emergency /brake, /and /her /car /rolled /down /the /hill, /injuring /two /children /who /were /playing. Which /of /the /following /doctrines /may /influence /Barbara's /liability /in /this /situation? A) Assumption /of /risk B) Strict /liability C) Negligence D) Attractive /nuisance /- /verified /answer(s)- ✔✔ The /answer /is /negligence. /The /doctrine /of /attractive /nuisance /is /exemplified /by /a /homeowner /not /fencing /in /a /below- ground /swimming /pool /and /then /children /drowning /in /the /pool. /Barbara, /by /failing /to /apply /her /emergency /brake /at /the /top /of /a /hill, /was /negligent. Which /of /the /following /describes /the /tendency /of /persons /with /a /higher-than-average /chance /of /loss
/to /seek /insurance /at /standard /rates, /which, /if /not /controlled /by /underwriting, /results /in /higher- than-expected /loss /levels? A) Adverse /selection B) Moral /hazard C) Physical /hazard D) Contributory /negligence /- /verified /answer(s)- ✔✔ This /describes /adverse /selection. /Physical /hazard /is /a /physical /condition /that /increases /the /chance /of /loss. /Under /the /doctrine /of /contributory /negligence, /if /any /negligence /on /the /part /of /the /injured /party /contributes /to /the
/reduction. /These /are /all /examples /of /risk /reduction. /Risk /avoidance /would /not /involve /avoiding /driving /or /riding / a /bicycle /at /all. /Risk /retention /would /be /choosing /not /to /use / a /seatbelt /or /wear / a /helmet, /or /not /installing /a /security /system /and /taking /one's /chances. /Risk /transfer /often /involves /insurance.
The /right /of /an /insurer /to /recover /damages /from /a /third /party /for /a /loss /covered /by /insurance /is A) indemnity. B) subrogation. C) coinsurance. D) insurable /interest. /- /verified /answer(s)- ✔✔ Subrogation /is /the /right /of /an /insurance /company /that /has /paid /for /a /loss /to /recover /its /payments /if /it /is /determined /that /a /different /insurance /company /or /person /is /responsible /for /the /loss /and /is /required /to /pay
- /when /the /insured /dies. A) II /only B) Both /I /and /II C) I /only D) Neither /I /nor /II /- /verified /answer(s)- ✔✔ For /life /insurance /to /be /underwritten, /an /insurable /interest /need /only /exist /when /the /policy /is /issued. Which /of /the /following /is /an /insurance /producer /who /represents /the /applicant /for /insurance? A) A /producing /general /agent B) An /independent /agent C) A /broker D) A /career /agent /- /verified /answer(s)- ✔✔ The /answer /is /a /broker. /Brokers /represent /potential /insureds. /Agents /represent /insurance /companies.
Which /of /the /following /is /the /role /of /the /executive /branch /in /regulating /the /insurance /industry /within /a /state? A) To /create /model /legislation /relative /to /the /insurance /industry B) To /enforce /the /laws /in /place /relative /to /the /insurance /industry C) To /interpret /and /apply /the /laws /in /place /relative /to /the /insurance /industry D) To /pass /laws /relative /to /the /insurance /industry /- /verified /answer(s)- ✔✔ The /answer /is /to /enforce /the /laws /in /place /relative /to /the /insurance /industry. /The /legislative /branch /votes /on /and /passes
Coinsurance C) A /deductible D) Other /insurance /- /verified /answer(s)- ✔✔ The /answer /is /coinsurance. /The /question /defines /coinsurance, /which /is / a /splitting /of /costs. / A /deductible /is /what /the /insured /must /pay /before /the /insurance /company /pays /anything. /It /is /possible
/to /have / a /loss /that /is /valued /at /an /amount /below /the /deductible, /and /nothing /would /be /owed /by /the /insurance /company. /It /is /not /possible /for /the /insurance /company /and /the /insured /to /not /split /costs /when /coinsurance /applies. Which /of /the /following /definitions /of /a /term /used /in /insurance /contract /law /is /CORRECT? A) Personal: /the /dollars /that /exchange /hands /are /of /unequal /amounts. B) Adhesion: /if /you /wrote /the /contract, /you /are /bound /by /any /ambiguities /you /created. C)
