CPCU 500 (Becoming a Leader in Risk Management and Insurance) FINAL EXAM 2 QUESTIONS AND ANSWERS

CPCU 500 (Becoming a Leader in Risk Management and
Insurance) FINAL EXAM 2 QUESTIONS AND CORRECT
VERIFIED ANSWERS

Aibuildingicontractoriusesilowerigradeimaterialsithanicallediforiinitheispecificationsiforianiofficeibuilding.iAiyea
riafteritheibuildingiwasicompleted,iaibalconyicollapses,iinjuringiseveraliemployeesiandicustomersiandicausingid
amageitoitheibuildingiandicontents.iForitheibuildingiconstructionicompanyithisiisianiexampleiofii-
iCorrectiAnswer-iAicompletedioperationsiliabilityiexposure




Aicommercialibuildingimayicontainifurniture,imachineryiandiequipment,irawimaterials,iandifinishediproducts.i
Whichioneiofiitheifollowingiisitheitermigenerallyiusediinipropertyiinsuranceipoliciesitoireferitoiallitypesiofiprope
rty?i-iCorrectiAnswer-iBusinessipersonaliproperty


Aicompanyiturnoverirateiwelliaboveicompanyiandiindustryiaverageibeiaisigniofi-iCorrectiAnswer-
iPersonneliproblemsithatineeditoibeiaddressed




Aicompletedioperationsiliabilityiexposureidiffersifromiaiproductsiliabilityilossiexposureiinithatitheicompletedio
perationsiliabilityilossiexposurei-iCorrectiAnswer-
iArisesioutiofitheientity'sicompletediwork,iincludingidefectiveipartsiorimaterialsifurnishediwithitheiwork.




Ailicensedielectricianicompletesitheijobiofirewiringiaihouseiandireturnsitoihisishop.iWithiregarditoithisijob,ianiel
ectricianihasiai-iCorrectiAnswer-iCompletedioperationsilossiexposure


AineighborihasisuediAndyiforipropertyidamageithatiisipotentiallyicoverediunderiAndy'sihomeownersiliabilityic
overage.iEveniifiithisilawsuitiisifounditoibeigroundless,iAndy'siinsurersiwillistilliprobablyibeiobligateditoipayi-
iCorrectiAnswer-iDefenseicosts




i

,Airiskimanagementiplanithaticonsidersialliofiitheirisksithatianiorganizationifaces,iincludingioperatio
nal,ifinancial,iandistrategicirisks,iisicalledi-iCorrectiAnswer-
iAnienterpriseiriskimanagementiplan.




Airiskimanagementiprogramimustibeimonitorediandiperiodicallyirevised,iandithatirevisioniinvolvesi
fouristeps.iWhichioneiofiitheifollowingiisioneiofiithoseifouristeps?i-iCorrectiAnswer-
iCompareiactualiresultsiwithitheiestablishediperformanceistandards.




Airiskiprofessionalimayiuseidispersionitoicompareitheicharacteristicsiofiprobabilityidistributions.i
Whichioneiofiitheifollowingistatementsiisitrueiinithisiregardi-iCorrectiAnswer-
iWhenitwoiorimoreidistributionsiareiplottedioniaigraph,itheioneiwithitheimostisharplyipeakedi

curveihasitheismallestistandardideviation


Aisecuredilenderi(securedicreditor)i-iCorrectiAnswer-
iAcquiresiconditionalirightsitoiproperty,isuchiasitheirightitoirepossessiitiifiloanipaymentsiarein

otimade.


Afteriidentifyingiandianalyzingilossiexposuresiandievaluatingiandiselectingitheiappropriateiriskima
nagementiprocessiisitoi-iCorrectiAnswer-iImplementitheiselecteditechnique.


Aligningirisksiwithitheiorganization'siriskiappetiteidefinesi-iCorrectiAnswer-
iTolerableiuncertainty




Allifor-profitiorganizationsiareiexposeditoinetiincomeilosses.iNetiincomeiisidefinediasi-
iCorrectiAnswer-iTotalirevenueiminusitotaliexpenses.




Alliofiitheifollowingiareiconsiderediriskicontrolitechniques,iExcept:i-iCorrectiAnswer-
Reinsurance


Aniempericaliprobabilityidistributioniisibasedioni-iCorrectiAnswer-iHistoricalidata

, Aniexampleiofiianiadministrativeiexpenseithaticaniminimizeitheicostiofiiriskiisi-iCorrectiAnswer-
Outsourcingitheiclaimifunction


Aniorganizationimustimeetitheistandardiofiicareihatiitiowesitoiothersiiniorderitoiensureithati-
iCorrectiAnswer-iLegaliobligationsiareisatisfied




Aniorganizationithatimaintainsiaiproductionisiteiandianiactiveibackupisiteithatifunctionsiasitheiprima
ryisiteiasineedediisiusingiwhichiofitheifollowingicontinuityiplanistrategies?i-iCorrectiAnswer-
iAlternativeisiteimode




Angelinaiborrowsimoneyifromitheibankitoipurchaseiaihouse.iTheihouseiservesiasisecurityiforitheiloa
n.iInithisitransaction,iAngelinaiisithei-iCorrectiAnswer-iMortgagor


Angelinaiborrowsimoneyifromitheibankitoipurchaseiaihouse.iTheihouseiservesiasisecurityiforitheiloa
n.iInithisitransaction,itheibankiisithei-iCorrectiAnswer-iMortgagee


Anyoneiwhoiownsiorioccupiesipropertyihasiai-iCorrectiAnswer-iPremisesiliabilityilossiexposure


Becauseiattorneys,iphysicians,iarchitectsiandiengineersiareiconsidereditoibeiexpertsiinitheirifieldsian
diareiexpecteditoiperformiaccordingly,iwhatiliabilityiexposureidoitheyifaceiifiiaiclientiisiinjurediwhe
nisuchianiexpertifailsitoiexerciseitheiappropriateistandardioficare?i-iCorrectiAnswer-
iProfessionaliliabilty




Businessicontinuityiisidesigneditoimeetibothitheiprimaryiriskimanagementiprogramipost-
lossigoalioficontinuityiofioperationiandithei-iCorrectiAnswer-iPost-lossigoaliofisurvival


Classifyingiriskiappropriatelyicanihelpiinimanagingirisk.iWhichioneiofiitheifollowingistatementsiisic
orrectiwithirespectitoitheiclassificationiofirisk.i-iCorrectiAnswer-
iAipureiriskiisiaichanceiofilossiorinoiloss,ibutinoichanceiofigain.




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