CFP512-Risk Management, Insurance, and Employee Benefits
Planning Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
peril -
Answer:
cause of financial loss
Question:
hazard -
Answer:
increases the probability that a loss will occur
Question:
static risk -
Answer:
losses that are caused by factors other than a change in
the economy, risks that are always present
Question:
dynamic risk -
Answer:
the result of the economy changing; insurance does
not cover these risks
Question:
pure risk -
Answer:
A chance of loss or no loss, but no chance of gain; is
insurable
Question:
speculative risk -
Answer:
chance of both loss or gain and is not insurable
(gambling)
,Question:
Risk Management Process -
Answer:
1. determine the objectives of the risk
management plan
2. identify the risks
3. evaluate the identified risks and the probability of occurrence
4. determine alternatives for managing risks and select alternative risks
5. implement most appropriate alternative
6. evaluate and review periodically
Question:
risk retention -
Answer:
no action is taken to avoid, transfer, or reduce risk
(self-insurance)
Question:
an insurable risk has four elements: -
Answer:
1. There must be a large and
similar sample of individuals to make the losses predictable
2. loss must be measurable and indefinite
3. loss must be accidental
4. loss cannot be catastrophic to society
Question:
Adverse selection -
Answer:
the likelihood that people with highest risk of
loss are also most likely to buy insurance
, Question:
An enforceable contract contains -
Answer:
1. offer and acceptance (
underwriting)
2. consideration (exchange of value)
3. legal object (must be a legal situation)
4. legal capacity (no minors or incompetents)
5. legal form (written usually, filed)
Question:
Actual Cash Value (ACV) -
Answer:
Cost to replace property with new
property of like kind and quality less depreciation.
ACV = RCV - Depreciation
Question:
Estoppel -
Answer:
A legal impediment to denying a fact or restoring a right
that has been previously waived.
Question:
personal contract -
Answer:
insurance is non-transferable (life insurance is
exception)
Question:
Contract of Indemnity -
Answer:
insured may recover from insurance
company only up to actual financial loss (life insurance is exception)
Question:
Subrogation -
Planning Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
peril -
Answer:
cause of financial loss
Question:
hazard -
Answer:
increases the probability that a loss will occur
Question:
static risk -
Answer:
losses that are caused by factors other than a change in
the economy, risks that are always present
Question:
dynamic risk -
Answer:
the result of the economy changing; insurance does
not cover these risks
Question:
pure risk -
Answer:
A chance of loss or no loss, but no chance of gain; is
insurable
Question:
speculative risk -
Answer:
chance of both loss or gain and is not insurable
(gambling)
,Question:
Risk Management Process -
Answer:
1. determine the objectives of the risk
management plan
2. identify the risks
3. evaluate the identified risks and the probability of occurrence
4. determine alternatives for managing risks and select alternative risks
5. implement most appropriate alternative
6. evaluate and review periodically
Question:
risk retention -
Answer:
no action is taken to avoid, transfer, or reduce risk
(self-insurance)
Question:
an insurable risk has four elements: -
Answer:
1. There must be a large and
similar sample of individuals to make the losses predictable
2. loss must be measurable and indefinite
3. loss must be accidental
4. loss cannot be catastrophic to society
Question:
Adverse selection -
Answer:
the likelihood that people with highest risk of
loss are also most likely to buy insurance
, Question:
An enforceable contract contains -
Answer:
1. offer and acceptance (
underwriting)
2. consideration (exchange of value)
3. legal object (must be a legal situation)
4. legal capacity (no minors or incompetents)
5. legal form (written usually, filed)
Question:
Actual Cash Value (ACV) -
Answer:
Cost to replace property with new
property of like kind and quality less depreciation.
ACV = RCV - Depreciation
Question:
Estoppel -
Answer:
A legal impediment to denying a fact or restoring a right
that has been previously waived.
Question:
personal contract -
Answer:
insurance is non-transferable (life insurance is
exception)
Question:
Contract of Indemnity -
Answer:
insured may recover from insurance
company only up to actual financial loss (life insurance is exception)
Question:
Subrogation -
