CFP 512 Practice Exam UPDATED
ACTUAL Questions and CORRECT
Answers
What is the minimum for the deductible on a high deductible plan for an individual and a family?
- CORRECT ANSWER At least $1,200 for an individual and $2,400 for a family
Which of the following refers to the process of evaluating and classifying the risk level of
applicants for insurance?
A)
Underwriting
B)
Actuarial science
C)
Adverse selection
D)
Utilization review - CORRECT ANSWER A)
Underwriting
Choose the method of risk management that is implemented by a homeowner who installs storm
shutters.
A)
Reduction
B)
Retention
C)
Transfer
,D)
Avoidance - CORRECT ANSWER A)
Reduction
You have a meeting with Oscar, age 26, and his wife Judith, age 25, this afternoon to review their
risk management plan. They have two children, two cars, a home, and a boat. Oscar works at the
local bank, and Judith works at an engineering firm. Identify the CORRECT statement(s)
regarding their risk management plan.
They have a limited amount of liability exposure.
They have a higher probability of becoming disabled versus experiencing premature death.
Having collision insurance on their cars is more important than liability coverage.
Long-term care insurance should not be a current priority within their risk management plan.
A)
I, II, and III
B)
II and IV
C)
IV only
D)
II, III, and IV - CORRECT ANSWER B)
II and IV
Oscar and Judith have unlimited liability exposure. A car accident could lead to an unlimited
amount of liability depending on the circumstances, as well as the possibility of negligence
occurring on their property. There is a higher probability of becoming disabled than of
experiencing premature death at their ages, and it is much more important to have liability
insurance on a vehicle than collision coverage. Liability claims may be much higher than any
type of collision damage to a vehicle. Both Oscar and Judith are too young to consider long-term
care insurance at this time.
,Preston called Joanna, an insurance broker, to obtain coverage on his 30-foot sailboat. Joanna
told him to send in a binder premium of $75. She told him that by doing so, he would be covered
and that he should go ahead and enjoy the boat. Joanna submitted an application for insurance to
Boater's Insurance Corp. for issuance of the policy. Boater's declined the coverage. The day
Joanna learned this, Preston called and told her a sudden wind caused him to lose control of his
boat. He then smashed into another sailboat, causing substantial damage to both boats.
Who will be responsible for the damages?
A)
Boater's Insurance Corp. will have to pay the damages since it did not notify Preston that he was
not covered.
B)
Boater's will have to pay since Joanna collected a premium from Preston.
C)
Preston will have to pay because no insurance policy is in force until the insurance company
accepts the risk.
D)
Joanna is respo - CORRECT ANSWER D)
Joanna is responsible because, as a broker, she personally bound coverage for Preston but was
unable to place the coverage before the accident.
Joanna will have to pay because, as a broker, she personally bound coverage for Preston but was
unable to place the coverage before the accident. Boater's Insurance Corp. was never a party to
an insurance contract with Preston. Since Joanna is a broker, her actions only speak for herself.
There is no insurance coverage in force. Preston will need to make a claim against Joanna, which
will likely be reviewed by her Errors and Omissions carrier. If Preston sues and wins, Joanna
also could be held personally liable.
Which of the following are duties of the courts in regulating insurers?
To render decisions on the meaning of policy terms
, To enact laws that govern the conduct of insurers
To rule on the constitutionality of insurance laws
To determine requirements an insurer must meet to obtain a license
A)
I and IV
B)
I and III
C)
III and IV
D)
II and IV - CORRECT ANSWER B)
I and III
The answer is I and III. The courts render decisions on the meaning of policy terms and rule on
the constitutionality of insurance laws. The state legislature completes the remaining two duties:
enacts laws and may establish requirements that an insurer must meet to obtain a license to do
business in that state.
The insurance industry is regulated primarily by
A)
the federal government.
B)
the Supreme Court.
C)
the National Association of Insurance Commissioners (NAIC).
D)
the individual states. - CORRECT ANSWER D)
ACTUAL Questions and CORRECT
Answers
What is the minimum for the deductible on a high deductible plan for an individual and a family?
- CORRECT ANSWER At least $1,200 for an individual and $2,400 for a family
Which of the following refers to the process of evaluating and classifying the risk level of
applicants for insurance?
A)
Underwriting
B)
Actuarial science
C)
Adverse selection
D)
Utilization review - CORRECT ANSWER A)
Underwriting
Choose the method of risk management that is implemented by a homeowner who installs storm
shutters.
A)
Reduction
B)
Retention
C)
Transfer
,D)
Avoidance - CORRECT ANSWER A)
Reduction
You have a meeting with Oscar, age 26, and his wife Judith, age 25, this afternoon to review their
risk management plan. They have two children, two cars, a home, and a boat. Oscar works at the
local bank, and Judith works at an engineering firm. Identify the CORRECT statement(s)
regarding their risk management plan.
They have a limited amount of liability exposure.
They have a higher probability of becoming disabled versus experiencing premature death.
Having collision insurance on their cars is more important than liability coverage.
Long-term care insurance should not be a current priority within their risk management plan.
A)
I, II, and III
B)
II and IV
C)
IV only
D)
II, III, and IV - CORRECT ANSWER B)
II and IV
Oscar and Judith have unlimited liability exposure. A car accident could lead to an unlimited
amount of liability depending on the circumstances, as well as the possibility of negligence
occurring on their property. There is a higher probability of becoming disabled than of
experiencing premature death at their ages, and it is much more important to have liability
insurance on a vehicle than collision coverage. Liability claims may be much higher than any
type of collision damage to a vehicle. Both Oscar and Judith are too young to consider long-term
care insurance at this time.
,Preston called Joanna, an insurance broker, to obtain coverage on his 30-foot sailboat. Joanna
told him to send in a binder premium of $75. She told him that by doing so, he would be covered
and that he should go ahead and enjoy the boat. Joanna submitted an application for insurance to
Boater's Insurance Corp. for issuance of the policy. Boater's declined the coverage. The day
Joanna learned this, Preston called and told her a sudden wind caused him to lose control of his
boat. He then smashed into another sailboat, causing substantial damage to both boats.
Who will be responsible for the damages?
A)
Boater's Insurance Corp. will have to pay the damages since it did not notify Preston that he was
not covered.
B)
Boater's will have to pay since Joanna collected a premium from Preston.
C)
Preston will have to pay because no insurance policy is in force until the insurance company
accepts the risk.
D)
Joanna is respo - CORRECT ANSWER D)
Joanna is responsible because, as a broker, she personally bound coverage for Preston but was
unable to place the coverage before the accident.
Joanna will have to pay because, as a broker, she personally bound coverage for Preston but was
unable to place the coverage before the accident. Boater's Insurance Corp. was never a party to
an insurance contract with Preston. Since Joanna is a broker, her actions only speak for herself.
There is no insurance coverage in force. Preston will need to make a claim against Joanna, which
will likely be reviewed by her Errors and Omissions carrier. If Preston sues and wins, Joanna
also could be held personally liable.
Which of the following are duties of the courts in regulating insurers?
To render decisions on the meaning of policy terms
, To enact laws that govern the conduct of insurers
To rule on the constitutionality of insurance laws
To determine requirements an insurer must meet to obtain a license
A)
I and IV
B)
I and III
C)
III and IV
D)
II and IV - CORRECT ANSWER B)
I and III
The answer is I and III. The courts render decisions on the meaning of policy terms and rule on
the constitutionality of insurance laws. The state legislature completes the remaining two duties:
enacts laws and may establish requirements that an insurer must meet to obtain a license to do
business in that state.
The insurance industry is regulated primarily by
A)
the federal government.
B)
the Supreme Court.
C)
the National Association of Insurance Commissioners (NAIC).
D)
the individual states. - CORRECT ANSWER D)
