CFP Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Risk -
Answer:
the possibility of a loss, or a negative deviation from a
desired outcome
Question:
Peril -
Answer:
the cause of that loss
Question:
Hazard -
Answer:
increases the potential for a loss
Question:
Static Risks -
Answer:
result from factors other than changes in the
economy, Ex: earthquake or flodd
Question:
Dynamic Risks -
Answer:
result of the changes in the economy, such as
changes in the business cycle or inflation
Question:
Fundamental Risks -
Answer:
affect a large group of people, Ex: earthquake
and recession
Question:
Particular Risk -
,Answer:
affect individuals or small group
Question:
Pure Risk -
Answer:
involves only the chance of loss or no loss, no chance
of gain
Question:
Speculative Risk -
Answer:
involves both the chance of loss and gain, ex:
gambling
Question:
Risk Management Process -
Answer:
1. Identify and Establish Risk
Management Goals
2. Gather Pertinent Data to Determine Risk Exposures
3. Analyze and Evaluate the Information to Identify Risk Exposures
4. Develop a Risk Management Plan
5. Communicate the Recommendations
6. Implement the Recommendations
7. Monitor the Recomendations for needed changes
Question:
Risk Control -
Answer:
seeks to minimize risk of loss
Question:
Risk Financing -
Answer:
pays the costs of losses incurred
,Question:
Law of Large Numbers -
Answer:
must be a large number of potential losses
so that the insurer can reasonably apportion the expected financial loss
Question:
Insurable Interest -
Answer:
when the interested party will suffer a financial
loss if the insured loss occurs
Question:
Coinsurance -
Answer:
may be a splitting of costs, or a minimum percentage
of insurance that is required to avoid being penalized
Question:
Subrogation -
Answer:
right of an insurance company that has paid for a loss
to recover its payments if its determined that a different insurance company is responsible for the
loss from collecting twice for the same loss
Question:
Independent Agents -
Answer:
respresent several insurance companies doing
business under the American agency system
Question:
Captive Agents -
Answer:
represent only one company or group
Question:
Career Agents -
, Answer:
usually life insurance agents in a general agency,
often maintain selling contracts with other companies to better serve clients
Question:
Producing General Agents -
Answer:
produce the majority of their income
by selling insurance personally, do not have specified territories, have authority to hire agents to
work for them
Question:
Broker -
Answer:
individuals who are licensed with and represent many
insurers
Question:
Surplus and excess line Brokers -
Answer:
handle any type of insurance that
cannot be purchased using normal distribution channels within a given state
Question:
Express Authority -
Answer:
specifically bestowed on the agent
Question:
Implied Authority -
Answer:
not expressly granted but assumed to have in
order to transact
Question:
Apparent Authority -
Answer:
appearance of authority based on the actions,
words, or deeds of the agent/insurer
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Risk -
Answer:
the possibility of a loss, or a negative deviation from a
desired outcome
Question:
Peril -
Answer:
the cause of that loss
Question:
Hazard -
Answer:
increases the potential for a loss
Question:
Static Risks -
Answer:
result from factors other than changes in the
economy, Ex: earthquake or flodd
Question:
Dynamic Risks -
Answer:
result of the changes in the economy, such as
changes in the business cycle or inflation
Question:
Fundamental Risks -
Answer:
affect a large group of people, Ex: earthquake
and recession
Question:
Particular Risk -
,Answer:
affect individuals or small group
Question:
Pure Risk -
Answer:
involves only the chance of loss or no loss, no chance
of gain
Question:
Speculative Risk -
Answer:
involves both the chance of loss and gain, ex:
gambling
Question:
Risk Management Process -
Answer:
1. Identify and Establish Risk
Management Goals
2. Gather Pertinent Data to Determine Risk Exposures
3. Analyze and Evaluate the Information to Identify Risk Exposures
4. Develop a Risk Management Plan
5. Communicate the Recommendations
6. Implement the Recommendations
7. Monitor the Recomendations for needed changes
Question:
Risk Control -
Answer:
seeks to minimize risk of loss
Question:
Risk Financing -
Answer:
pays the costs of losses incurred
,Question:
Law of Large Numbers -
Answer:
must be a large number of potential losses
so that the insurer can reasonably apportion the expected financial loss
Question:
Insurable Interest -
Answer:
when the interested party will suffer a financial
loss if the insured loss occurs
Question:
Coinsurance -
Answer:
may be a splitting of costs, or a minimum percentage
of insurance that is required to avoid being penalized
Question:
Subrogation -
Answer:
right of an insurance company that has paid for a loss
to recover its payments if its determined that a different insurance company is responsible for the
loss from collecting twice for the same loss
Question:
Independent Agents -
Answer:
respresent several insurance companies doing
business under the American agency system
Question:
Captive Agents -
Answer:
represent only one company or group
Question:
Career Agents -
, Answer:
usually life insurance agents in a general agency,
often maintain selling contracts with other companies to better serve clients
Question:
Producing General Agents -
Answer:
produce the majority of their income
by selling insurance personally, do not have specified territories, have authority to hire agents to
work for them
Question:
Broker -
Answer:
individuals who are licensed with and represent many
insurers
Question:
Surplus and excess line Brokers -
Answer:
handle any type of insurance that
cannot be purchased using normal distribution channels within a given state
Question:
Express Authority -
Answer:
specifically bestowed on the agent
Question:
Implied Authority -
Answer:
not expressly granted but assumed to have in
order to transact
Question:
Apparent Authority -
Answer:
appearance of authority based on the actions,
words, or deeds of the agent/insurer