FPQP® Exam Test Preparation Questions and Must-Have Verified Financial Solutions Updated 2025/2026

FPQP® Exam Test Preparation Questions and Must-Have Verified Financial Solutions Updated 2025/2026 Types of personal risk correct answer loss of income, unemployment, disability, death, divorce, catastrophic losses, negligence 4 components to negligence 1. existence of a legal duty 2. failure to perform a legal duty 3. actual damage is caused 4. proximate cause is established You should first insure against possible ________ _______ catastrophic losses The 4 Risk Management Techniques risk avoidance - don't do or own risk reduction - reduce loss risk retention - self-insuring risk transfer - insurance Rules of Risk Management 1. Don't risk more than you can afford to lose 2. Don't risk a lot for a little 3. Consider the odds 4 Types of Pure Risk correct answer 1. personal risk correct answer the risk that we might become unable to earn an income 2. property risk correct answer the possibility that we may lose some of our property 3. liability risk correct answer the chance that we could accidentally cause a loss to another person 4. failure of others correct answer we may suffer a loss because of another person's action or inaction A peril is a cause of loss A hazard is something that increases the chance of loss moral hazard correct answer people being dishonest morale hazard correct answer corps/institutions are careless and have a poor attitude 4 elements for an insurable risk 1. the law of large numbers must apply 2. the loss must be accidental 3. the loss must be definite and measurable 4. the loss must not be catastrophic to the insurance company the insurance contract correct answer 1. insurable interest - the person applying must have a personal financial loss if the covered event occurs 2. unilateral v bilateral - unilateral, no commitment, bilateral, commitment from both 3. indemnity - made whole, not profit 4. riders and endorsements the 4 basic sections of an insurance policy correct answer declarations insuring agreement exclusions conditions 2 Types of Insurance Companies correct answer Mutual and Stock Mutual Insurance Companies Owned by policyholders/participating policies (policyholders receive profit/dividends) Stock Insurance Companies Owned by stockholders/usually nonparticipating policies (stockholders receive dividends)