Chartered Property
Casualty Underwriter
(CPCU) Exam
Questions And Correct
Answers (Verified
Answers) Plus
Rationales 2025/2026
Q&A | Instant
Download Pdf
1. The primary purpose of insurance is to:
A. Eliminate risk
B. Transfer risk
,C. Increase profits
D. Avoid regulation
Answer: B — Transfer risk
Insurance transfers the financial consequences of risk from
the insured to the insurer.
2. Which principle requires that an insured must suffer a
financial loss to collect insurance benefits?
A. Indemnity
B. Contribution
C. Insurable Interest
D. Subrogation
Answer: C — Insurable Interest
Insurable interest ensures the insured has a legitimate
financial stake in the insured property or life.
3. A peril is best defined as:
A. A condition that increases loss probability
B. The cause of loss
C. A policy condition
D. A financial loss
Answer: B — The cause of loss
Perils such as fire or theft are direct causes of loss.
4. Which hazard involves dishonesty or carelessness?
,A. Physical hazard
B. Legal hazard
C. Moral hazard
D. Economic hazard
Answer: C — Moral hazard
Moral hazard involves intentional dishonesty or increased
risk due to character.
5. Which law governs insurance contract formation?
A. Criminal law
B. Tort law
C. Contract law
D. Administrative law
Answer: C — Contract law
Insurance policies are legally binding contracts governed by
contract law.
6. A deductible primarily:
A. Increases insurer expenses
B. Reduces small claims
C. Eliminates moral hazard
D. Increases premiums
Answer: B — Reduces small claims
Deductibles discourage minor claims and reduce
administrative costs.
, 7. Subrogation allows an insurer to:
A. Cancel a policy
B. Recover payment from a responsible third party
C. Increase premiums
D. Transfer risk
Answer: B — Recover payment from a responsible third
party
Subrogation allows insurers to recover claim payments from
negligent parties.
8. Which term refers to sharing risk among many insureds?
A. Hedging
B. Pooling
C. Retention
D. Diversification
Answer: B — Pooling
Pooling spreads risk across many policyholders.
9. Which characteristic makes risk insurable?
A. Speculative outcome
B. Large number of exposure units
C. Intentional loss
D. Unpredictable loss size
Answer: B — Large number of exposure units
Insurers rely on the law of large numbers.
Casualty Underwriter
(CPCU) Exam
Questions And Correct
Answers (Verified
Answers) Plus
Rationales 2025/2026
Q&A | Instant
Download Pdf
1. The primary purpose of insurance is to:
A. Eliminate risk
B. Transfer risk
,C. Increase profits
D. Avoid regulation
Answer: B — Transfer risk
Insurance transfers the financial consequences of risk from
the insured to the insurer.
2. Which principle requires that an insured must suffer a
financial loss to collect insurance benefits?
A. Indemnity
B. Contribution
C. Insurable Interest
D. Subrogation
Answer: C — Insurable Interest
Insurable interest ensures the insured has a legitimate
financial stake in the insured property or life.
3. A peril is best defined as:
A. A condition that increases loss probability
B. The cause of loss
C. A policy condition
D. A financial loss
Answer: B — The cause of loss
Perils such as fire or theft are direct causes of loss.
4. Which hazard involves dishonesty or carelessness?
,A. Physical hazard
B. Legal hazard
C. Moral hazard
D. Economic hazard
Answer: C — Moral hazard
Moral hazard involves intentional dishonesty or increased
risk due to character.
5. Which law governs insurance contract formation?
A. Criminal law
B. Tort law
C. Contract law
D. Administrative law
Answer: C — Contract law
Insurance policies are legally binding contracts governed by
contract law.
6. A deductible primarily:
A. Increases insurer expenses
B. Reduces small claims
C. Eliminates moral hazard
D. Increases premiums
Answer: B — Reduces small claims
Deductibles discourage minor claims and reduce
administrative costs.
, 7. Subrogation allows an insurer to:
A. Cancel a policy
B. Recover payment from a responsible third party
C. Increase premiums
D. Transfer risk
Answer: B — Recover payment from a responsible third
party
Subrogation allows insurers to recover claim payments from
negligent parties.
8. Which term refers to sharing risk among many insureds?
A. Hedging
B. Pooling
C. Retention
D. Diversification
Answer: B — Pooling
Pooling spreads risk across many policyholders.
9. Which characteristic makes risk insurable?
A. Speculative outcome
B. Large number of exposure units
C. Intentional loss
D. Unpredictable loss size
Answer: B — Large number of exposure units
Insurers rely on the law of large numbers.
