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CPCU 551 - Chapter 1 Questions and Correct
Answers
Exposure avoidance Ans: abandons or avoids the loss situation,
thus eliminating all possibility of loss
Proactive avoidance Ans: occurs when a firm avoids ever incurring
a particular loss exposure
Abandonment Ans: occurs when a firm eliminates an existing loss
exposure
Loss prevention Ans: reduces loss frequency
Loss reduction Ans: reduces loss severity
Separation Ans: disperses resources over two or more locations
Duplication Ans: creates copies or spares of important items and
stores them at separate locations
Diversification Ans: spreads loss exposures over several projects,
products, markets, and/or regions
Retention Ans: generates funds from within the firm to pay for
losses; compare transfer
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, 2 | Page
Transfer Ans: generates funds from outside the firm to pay for
losses, through either insurance or noninsurance transfer;
compare retention
Burglary Ans: theft with forcible entry
Robbery Ans: theft by threat or use of bodily violence
Employee theft Ans: theft committed by an employee against his
employer.
Commercial property insurance Ans: covers property loss
exposures for businesses and nonprofit organizations
Multiline policy Ans: covers two or more lines of business
Standard form Ans: developed by the Insurance Services Office,
Inc., the American Association of Insurance Services, or another
insurance advisory organization
Nonstandard form Ans: developed independently by insurers or
brokers
Commercial package policy (CPP) Ans: a multiline policy with two
or more ISO commercial lines coverage parts
CPP Ans: abbreviates commercial package policy
© 2025 All rights reserved
CPCU 551 - Chapter 1 Questions and Correct
Answers
Exposure avoidance Ans: abandons or avoids the loss situation,
thus eliminating all possibility of loss
Proactive avoidance Ans: occurs when a firm avoids ever incurring
a particular loss exposure
Abandonment Ans: occurs when a firm eliminates an existing loss
exposure
Loss prevention Ans: reduces loss frequency
Loss reduction Ans: reduces loss severity
Separation Ans: disperses resources over two or more locations
Duplication Ans: creates copies or spares of important items and
stores them at separate locations
Diversification Ans: spreads loss exposures over several projects,
products, markets, and/or regions
Retention Ans: generates funds from within the firm to pay for
losses; compare transfer
© 2025 All rights reserved
, 2 | Page
Transfer Ans: generates funds from outside the firm to pay for
losses, through either insurance or noninsurance transfer;
compare retention
Burglary Ans: theft with forcible entry
Robbery Ans: theft by threat or use of bodily violence
Employee theft Ans: theft committed by an employee against his
employer.
Commercial property insurance Ans: covers property loss
exposures for businesses and nonprofit organizations
Multiline policy Ans: covers two or more lines of business
Standard form Ans: developed by the Insurance Services Office,
Inc., the American Association of Insurance Services, or another
insurance advisory organization
Nonstandard form Ans: developed independently by insurers or
brokers
Commercial package policy (CPP) Ans: a multiline policy with two
or more ISO commercial lines coverage parts
CPP Ans: abbreviates commercial package policy
© 2025 All rights reserved
