FP512 Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Risk Peril and Hazard -
Answer:
Perils are the cause of risk (nouns;
hurricane, tornado). Hazards are factors that could increase the likelihood of a hazard happening
(oil rags by heater)
Question:
Dynamic, fundamental, and Static risk -
Answer:
insurance really only
covers static risk; dynamic risk would be something like market dynamic, inflation, etc.
fundamental risks affect a large group of people (earthquake would be static and fundamental)
Question:
pure risk vs speculative risk -
Answer:
pure risk- what is insurable- potential
for either loss or no loss.
speculative risk- not insurable- potential for gain or loss
Question:
Risk management process -
,Answer:
1. identify and establish risk
management goals
2. determine risk exposures (look at current policies, take inventory)
3. analyze and evaluate info and identify risk exposures
4. develop a risk management plan
5. communicate recommendations
6. implement recommendations
7. monitor recommendation for need changes
Question:
Agents vs Brokers -
Answer:
agents represent the insurance company
(insurance company is legally liable for their agents), brokers represent the insured.
Question:
express, implied, and apparent authority -
Answer:
express; (company to
agent) stated
implied; not stated but implied-collect premiums, etc.
apparent; (agent to insured) what can get you in trouble
Question:
NAIC -
Answer:
National Association of Insurance Commissioners, an
organization composed of insurance commissioners from all 50 states, the District of Columbia
and the 4 U.S territories, formed to resolve insurance regulatory issues. Can't force states to
adopt their regulations
Question:
aleatory adhesion and conditional contracts -
, Answer:
aleatory- outcome is
controlled by chance and the dollar exchange is substantially unequal
adhesion- prepared by one party and either accepted or denied by the other
conditional- pays on the conditional that a covered loss occurs
Question:
indemnity -
Answer:
payment for loss can only bring you back to the
financial position you were before the loss- cant profit from loss
Question:
requirements for insurance contract to be legally enforceable -
Answer:
offer
and acceptance, consideration (payment), legal object (purpose of the contract), competent
parties (if one of the parties is legally incompetent: age, illness, etc. the contract is most likely
valid but may be voided by the incompetent person, legal form (could be orally if it can be
proven that the agreement existed
Question:
recission -
Answer:
contract deemed to be null from the beginning- insurer
required to return premiums
Question:
waiver and estoppel -
Answer:
work together; 'we dont insure candy stores
example'
insurer waives their rights by issuing a contract and would be estopped in denying payment if
loss occurs
Question:
Perils specifically excluded from most homeowner policies (in HO-3 special form-open perils;
most popular) -
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Risk Peril and Hazard -
Answer:
Perils are the cause of risk (nouns;
hurricane, tornado). Hazards are factors that could increase the likelihood of a hazard happening
(oil rags by heater)
Question:
Dynamic, fundamental, and Static risk -
Answer:
insurance really only
covers static risk; dynamic risk would be something like market dynamic, inflation, etc.
fundamental risks affect a large group of people (earthquake would be static and fundamental)
Question:
pure risk vs speculative risk -
Answer:
pure risk- what is insurable- potential
for either loss or no loss.
speculative risk- not insurable- potential for gain or loss
Question:
Risk management process -
,Answer:
1. identify and establish risk
management goals
2. determine risk exposures (look at current policies, take inventory)
3. analyze and evaluate info and identify risk exposures
4. develop a risk management plan
5. communicate recommendations
6. implement recommendations
7. monitor recommendation for need changes
Question:
Agents vs Brokers -
Answer:
agents represent the insurance company
(insurance company is legally liable for their agents), brokers represent the insured.
Question:
express, implied, and apparent authority -
Answer:
express; (company to
agent) stated
implied; not stated but implied-collect premiums, etc.
apparent; (agent to insured) what can get you in trouble
Question:
NAIC -
Answer:
National Association of Insurance Commissioners, an
organization composed of insurance commissioners from all 50 states, the District of Columbia
and the 4 U.S territories, formed to resolve insurance regulatory issues. Can't force states to
adopt their regulations
Question:
aleatory adhesion and conditional contracts -
, Answer:
aleatory- outcome is
controlled by chance and the dollar exchange is substantially unequal
adhesion- prepared by one party and either accepted or denied by the other
conditional- pays on the conditional that a covered loss occurs
Question:
indemnity -
Answer:
payment for loss can only bring you back to the
financial position you were before the loss- cant profit from loss
Question:
requirements for insurance contract to be legally enforceable -
Answer:
offer
and acceptance, consideration (payment), legal object (purpose of the contract), competent
parties (if one of the parties is legally incompetent: age, illness, etc. the contract is most likely
valid but may be voided by the incompetent person, legal form (could be orally if it can be
proven that the agreement existed
Question:
recission -
Answer:
contract deemed to be null from the beginning- insurer
required to return premiums
Question:
waiver and estoppel -
Answer:
work together; 'we dont insure candy stores
example'
insurer waives their rights by issuing a contract and would be estopped in denying payment if
loss occurs
Question:
Perils specifically excluded from most homeowner policies (in HO-3 special form-open perils;
most popular) -
