CPCU 500 Exam 1 & Practice Exam
Questions and Answers Practice
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Already Graded A+
The risk control technique that disperses a particular asset or activity over several locations and
regularly relies on that asset or activity as part of an organization's working resources is:
A. Avoidance.
B. Diversification.
C. Separation.
D. Duplication. - Correct Answer-C. Separation.
The control technique that uses backups, spares, or copies of critical property, information, or
capabilities and keeps them in reserve is which one of the following risk management techniques?
A. Risk transfer
B. Diversification
C. Separation
D. Duplication - Correct Answer-D. Duplication
Concerning fundamental guidelines of contractual risk transfer management, it is wise to:
A. Be aggressive in negotiations—the more ruthless the better.
B. Require a certificate of insurance for contractual liability before contract operations begin.
C. Try to be as general and nonspecific as possible.
D. Avoid being named as an additional insured on the transferee's policy. - Correct Answer-B. Require a
certificate of insurance for contractual liability before contract operations begin.
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,One type of noninsurance risk control transfer, a disclaimer of warranties, is used to:
A. Deny any express warranties made in conjunction with the sale of property.
B. Recognize and validate the assumption of contractual liability.
C. Deny an exculpatory clause.
D. Reinforce implied warranties of merchantability. - Correct Answer-A. Deny any express warranties
made in conjunction with the sale of property.
In both noninsurance risk control and noninsurance risk financing transfers,
A. The transfer becomes effective only when the transferee actually performs the action that rids the
transferor of risk.
B. A contract is usually formed before any loss occurs.
C. The transferor has protection only after the funds to restore a loss are paid.
D. The transferor has protection regardless of the transferee's bankruptcy. - Correct Answer-B. A
contract is usually formed before any loss occurs.
A1 Architectural Design relies on its historical files and blueprints. The partners of the firm are discussing
risk control measures that can be implemented to provide protection against property-related losses.
Which one of the following would likely offer the best protection for this exposure?
A. Separation
B. Avoidance
C. Diversification
D. Duplication - Correct Answer-D. Duplication
The risk control technique that spreads loss exposure over numerous projects, products, markets, or
regions is which one of the following risk management techniques?
A. Duplication
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,B. Diversification
C. Separation
D. Risk transfer - Correct Answer-B. Diversification
Leasing is a useful noninsurance risk control transfer because:
A. The lessee retains the loss exposures resulting from property destruction.
B. The lessee stands to lose the property's rental income in the event of damage to the property.
C. Certain loss exposures accompany property ownership but do not accompany its use or occupancy.
D. The lessor loses the ability to use the property for the remainder of the lease in the event of damage
to the property. - Correct Answer-C. Certain loss exposures accompany property ownership but do not
accompany its use or occupancy.
Which one of the following is true about the liability involved in contracting services?
A. In contracting for services, the party that transfers the risk must be an independent contractor, and
the party that accepts the risk must be a subcontractor.
B. The responsibility that certain duties be performed safely cannot be delegated to another party, such
as the duty of common carriers to carry passengers safely.
C. If the party that hired the contractor is negligent in selecting the contractor, the contractor is directly
liable for such negligence.
D. If the subcontracted work is inherently dangerous to others, the party who hired the contractor is not
liable for an injury to a third party caused by the contractor's negligence. - Correct Answer-B. The
responsibility that certain duties be performed safely cannot be delegated to another party, such as the
duty of common carriers to carry passengers safely.
An organization that operates warehouses in two locations is using the risk control technique of:
A. Diversification.
B. Duplication.
C. Separation.
D. Loss prevention. - Correct Answer-C. Separation.
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, Motley Manufacturing is considering locating one of its facilities in northern California, but is concerned
about the possibility of loss due to which one of the following natural hazards, which has one of the
highest loss exposures for this phenomenon in this part of the country?
A. Construction defects
B. Earthquake
C. Flood
D. Subsidence - Correct Answer-B. Earthquake
A female job seeker was denied employment at a local law firm as she did not fulfill a job requirement
that all employees be at least six feet tall. An employment practices liability claim was filed against the
law firm alleging discriminatory actions. The type of discrimination described in this instance is:
A. Overt discrimination.
B. Disparate treatment.
C. Gender discrimination.
D. Disparate impact. - Correct Answer-D. Disparate impact
The risk management professional for a large multi-location super market chain in the New England area
observed that all of the buildings have a flat roof. His concern is primarily due to the possible loss
resulting from:
A. Fire and lightning.
B. Weight of snow, sleet, and ice.
C. Earthquake.
D. Flood. - Correct Answer-B. Weight of snow, sleet, and ice.
The Life Safety Code requires that many buildings or structures should have:
A. Fire alarms.
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Questions and Answers Practice
Questions with Solutions Newest |
Already Graded A+
The risk control technique that disperses a particular asset or activity over several locations and
regularly relies on that asset or activity as part of an organization's working resources is:
A. Avoidance.
B. Diversification.
C. Separation.
D. Duplication. - Correct Answer-C. Separation.
The control technique that uses backups, spares, or copies of critical property, information, or
capabilities and keeps them in reserve is which one of the following risk management techniques?
A. Risk transfer
B. Diversification
C. Separation
D. Duplication - Correct Answer-D. Duplication
Concerning fundamental guidelines of contractual risk transfer management, it is wise to:
A. Be aggressive in negotiations—the more ruthless the better.
B. Require a certificate of insurance for contractual liability before contract operations begin.
C. Try to be as general and nonspecific as possible.
D. Avoid being named as an additional insured on the transferee's policy. - Correct Answer-B. Require a
certificate of insurance for contractual liability before contract operations begin.
1|Page
,One type of noninsurance risk control transfer, a disclaimer of warranties, is used to:
A. Deny any express warranties made in conjunction with the sale of property.
B. Recognize and validate the assumption of contractual liability.
C. Deny an exculpatory clause.
D. Reinforce implied warranties of merchantability. - Correct Answer-A. Deny any express warranties
made in conjunction with the sale of property.
In both noninsurance risk control and noninsurance risk financing transfers,
A. The transfer becomes effective only when the transferee actually performs the action that rids the
transferor of risk.
B. A contract is usually formed before any loss occurs.
C. The transferor has protection only after the funds to restore a loss are paid.
D. The transferor has protection regardless of the transferee's bankruptcy. - Correct Answer-B. A
contract is usually formed before any loss occurs.
A1 Architectural Design relies on its historical files and blueprints. The partners of the firm are discussing
risk control measures that can be implemented to provide protection against property-related losses.
Which one of the following would likely offer the best protection for this exposure?
A. Separation
B. Avoidance
C. Diversification
D. Duplication - Correct Answer-D. Duplication
The risk control technique that spreads loss exposure over numerous projects, products, markets, or
regions is which one of the following risk management techniques?
A. Duplication
2|Page
,B. Diversification
C. Separation
D. Risk transfer - Correct Answer-B. Diversification
Leasing is a useful noninsurance risk control transfer because:
A. The lessee retains the loss exposures resulting from property destruction.
B. The lessee stands to lose the property's rental income in the event of damage to the property.
C. Certain loss exposures accompany property ownership but do not accompany its use or occupancy.
D. The lessor loses the ability to use the property for the remainder of the lease in the event of damage
to the property. - Correct Answer-C. Certain loss exposures accompany property ownership but do not
accompany its use or occupancy.
Which one of the following is true about the liability involved in contracting services?
A. In contracting for services, the party that transfers the risk must be an independent contractor, and
the party that accepts the risk must be a subcontractor.
B. The responsibility that certain duties be performed safely cannot be delegated to another party, such
as the duty of common carriers to carry passengers safely.
C. If the party that hired the contractor is negligent in selecting the contractor, the contractor is directly
liable for such negligence.
D. If the subcontracted work is inherently dangerous to others, the party who hired the contractor is not
liable for an injury to a third party caused by the contractor's negligence. - Correct Answer-B. The
responsibility that certain duties be performed safely cannot be delegated to another party, such as the
duty of common carriers to carry passengers safely.
An organization that operates warehouses in two locations is using the risk control technique of:
A. Diversification.
B. Duplication.
C. Separation.
D. Loss prevention. - Correct Answer-C. Separation.
3|Page
, Motley Manufacturing is considering locating one of its facilities in northern California, but is concerned
about the possibility of loss due to which one of the following natural hazards, which has one of the
highest loss exposures for this phenomenon in this part of the country?
A. Construction defects
B. Earthquake
C. Flood
D. Subsidence - Correct Answer-B. Earthquake
A female job seeker was denied employment at a local law firm as she did not fulfill a job requirement
that all employees be at least six feet tall. An employment practices liability claim was filed against the
law firm alleging discriminatory actions. The type of discrimination described in this instance is:
A. Overt discrimination.
B. Disparate treatment.
C. Gender discrimination.
D. Disparate impact. - Correct Answer-D. Disparate impact
The risk management professional for a large multi-location super market chain in the New England area
observed that all of the buildings have a flat roof. His concern is primarily due to the possible loss
resulting from:
A. Fire and lightning.
B. Weight of snow, sleet, and ice.
C. Earthquake.
D. Flood. - Correct Answer-B. Weight of snow, sleet, and ice.
The Life Safety Code requires that many buildings or structures should have:
A. Fire alarms.
4|Page
