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CFP FP512 KEY TERMS QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Abandonment Ans: Represents the possibility of a loss—or a negative
deviation from a desired outcome.
Absolute Liability (Strict Liability) Ans: The standard imposed when a
person or organization is held responsible for any damages, even when
there has been no negligence (e.g. keeping wild animals)
Actual Cash Value Ans: replacement cost minus depreciation
Adjuster Ans: A representative of an insurance company who
investigates and acts on the behalf of the company to obtain agreements
for the amount of the insurance claim.
Adverse Selection Ans: A high-risk person benefits more from insurance,
so is more likely to purchase it.
Aleatory Contract Ans: a contract where the values exchanged may not
be equal but depend on chance (insurance)
Attractive Nuissance Ans: a hazardous condition that can attract and
injure children (e.g. a swimming pool)
Express Authority Ans: The authority granted to an agent by means of
the agent's written contract.
Implied Authority Ans: Authority that is not expressed or written into
the contract, but which the agent is assumed to have in order to transact
the business of insurance for the principal
Apparent Authority Ans: The authority an agent is believed by third
parties to have because of the behavior of the principal
Bilateral Ans: When either party to the contract can enforce the contract
in a court of law, the contract is
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Broker Ans: Cannot bind the insurer and has none of an agent's
authority.
Captive Agents Ans: an insurance agent who represents only one
insurance company and who is, in effect, an employee of that company
Career Agents Ans: Are usually life insurance agents in a general agency
or acompany-owned office under the agency management or the branch
office systems. In some cases, these agents are also captive agents, but
in many situations these agents maintain selling contracts with other
companies to better serve their clients. These agents often choose this
form of operation because of the support provided by the agency and the
company.
Coinsurance Ans: may be a splitting of costs, or it may refer to a
minimum percentage of insurance that is required to avoid being
penalized for inadequate property insurance when there are partial
losses.
Collateral Source Rule Ans: This rule states that if others cause you to
suffer a loss, they are obligated to pay you for your loss, and they do not
have their liability reduced just because you had insurance to cover such
a loss
Comparative Negligence Ans: damages are adjusted to reflect the extent
to which the injured party's own negligence contributed to his injuries.
For example, if a jury determines that the injured party was 20% to
blame for the injury, the plaintiff's award might be reduced by 20%.
Concealment Ans: the intentional withholding of material information,
violates the requirement of utmost good faith even if no specific question
arises about that information.
Conditional Insurance Ans: pays on the condition that a covered loss
occurs.
Consideration Ans: is the act or the payment for the act. Each party
must give the other something of value. The insured pays an initial
premium, and the insurer binds coverage.
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Contract Ans: a binding agreement between two or more persons that is
enforceable by law
Contract Law Ans: Law that refers to agreements between individuals
and entities that are binding
Contract of Adhesion Ans: is one that is prepared by one party and
either accepted or rejected by the other. There is no negotiation in the
process.
Contributory Negligence Ans: If any negligence on the part of the
injured party contributes to the injury, it absolves the other party of
liability. a person cannot recover damages if his own negligence
contributed in any way to his injuries.
Deductible Ans: is a retained risk. It is the portion of insured losses that
the insured is expected to pay before the insurance company pays
anything.
Doctrine of Estoppel Ans: any misrepresentation made by one party
toward another who relied therein in good faith will be held true and
binding against that person who made the misrepresentation.
Doctrine of Waiver Ans: Means that a party, by her own actions (or the
actions of her agent), has voluntarily relinquished or surrendered a
known right...
Dynamic Risks Ans: Are the result of changes in the economy, such as
changes in the business cycle or inflation. Insurance does not typically
cover these types of risks.
Equitable Remedies Ans: ...
Field Underwriting Ans: Selection of clients by the agent in accordance
with company standards
Federal Regulation Ans: ...
Fundamental Risks Ans: affect a large group of people and do not have
to do with the economy. Examples include recessions and earthquakes.
CFP FP512 KEY TERMS QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Abandonment Ans: Represents the possibility of a loss—or a negative
deviation from a desired outcome.
Absolute Liability (Strict Liability) Ans: The standard imposed when a
person or organization is held responsible for any damages, even when
there has been no negligence (e.g. keeping wild animals)
Actual Cash Value Ans: replacement cost minus depreciation
Adjuster Ans: A representative of an insurance company who
investigates and acts on the behalf of the company to obtain agreements
for the amount of the insurance claim.
Adverse Selection Ans: A high-risk person benefits more from insurance,
so is more likely to purchase it.
Aleatory Contract Ans: a contract where the values exchanged may not
be equal but depend on chance (insurance)
Attractive Nuissance Ans: a hazardous condition that can attract and
injure children (e.g. a swimming pool)
Express Authority Ans: The authority granted to an agent by means of
the agent's written contract.
Implied Authority Ans: Authority that is not expressed or written into
the contract, but which the agent is assumed to have in order to transact
the business of insurance for the principal
Apparent Authority Ans: The authority an agent is believed by third
parties to have because of the behavior of the principal
Bilateral Ans: When either party to the contract can enforce the contract
in a court of law, the contract is
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Broker Ans: Cannot bind the insurer and has none of an agent's
authority.
Captive Agents Ans: an insurance agent who represents only one
insurance company and who is, in effect, an employee of that company
Career Agents Ans: Are usually life insurance agents in a general agency
or acompany-owned office under the agency management or the branch
office systems. In some cases, these agents are also captive agents, but
in many situations these agents maintain selling contracts with other
companies to better serve their clients. These agents often choose this
form of operation because of the support provided by the agency and the
company.
Coinsurance Ans: may be a splitting of costs, or it may refer to a
minimum percentage of insurance that is required to avoid being
penalized for inadequate property insurance when there are partial
losses.
Collateral Source Rule Ans: This rule states that if others cause you to
suffer a loss, they are obligated to pay you for your loss, and they do not
have their liability reduced just because you had insurance to cover such
a loss
Comparative Negligence Ans: damages are adjusted to reflect the extent
to which the injured party's own negligence contributed to his injuries.
For example, if a jury determines that the injured party was 20% to
blame for the injury, the plaintiff's award might be reduced by 20%.
Concealment Ans: the intentional withholding of material information,
violates the requirement of utmost good faith even if no specific question
arises about that information.
Conditional Insurance Ans: pays on the condition that a covered loss
occurs.
Consideration Ans: is the act or the payment for the act. Each party
must give the other something of value. The insured pays an initial
premium, and the insurer binds coverage.
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Contract Ans: a binding agreement between two or more persons that is
enforceable by law
Contract Law Ans: Law that refers to agreements between individuals
and entities that are binding
Contract of Adhesion Ans: is one that is prepared by one party and
either accepted or rejected by the other. There is no negotiation in the
process.
Contributory Negligence Ans: If any negligence on the part of the
injured party contributes to the injury, it absolves the other party of
liability. a person cannot recover damages if his own negligence
contributed in any way to his injuries.
Deductible Ans: is a retained risk. It is the portion of insured losses that
the insured is expected to pay before the insurance company pays
anything.
Doctrine of Estoppel Ans: any misrepresentation made by one party
toward another who relied therein in good faith will be held true and
binding against that person who made the misrepresentation.
Doctrine of Waiver Ans: Means that a party, by her own actions (or the
actions of her agent), has voluntarily relinquished or surrendered a
known right...
Dynamic Risks Ans: Are the result of changes in the economy, such as
changes in the business cycle or inflation. Insurance does not typically
cover these types of risks.
Equitable Remedies Ans: ...
Field Underwriting Ans: Selection of clients by the agent in accordance
with company standards
Federal Regulation Ans: ...
Fundamental Risks Ans: affect a large group of people and do not have
to do with the economy. Examples include recessions and earthquakes.
