CFP FP512 Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Abandonment -
Answer:
Represents the possibility of a loss-or a negative
deviation from a desired outcome.
Question:
Absolute Liability (Strict Liability) -
Answer:
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)
Question:
Actual Cash Value -
Answer:
replacement cost minus depreciation
Question:
Adjuster -
Answer:
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.
Question:
Adverse Selection -
Answer:
A high-risk person benefits more from
insurance, so is more likely to purchase it.
Question:
Aleatory Contract -
Answer:
a contract where the values exchanged may not
be equal but depend on chance (insurance)
,Question:
Attractive Nuissance -
Answer:
a hazardous condition that can attract and
injure children (e.g. a swimming pool)
Question:
Express Authority -
Answer:
The authority granted to an agent by means of
the agent's written contract.
Question:
Implied Authority -
Answer:
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
Question:
Apparent Authority -
Answer:
The authority an agent is believed by third
parties to have because of the behavior of the principal
Question:
Bilateral -
Answer:
When either party to the contract can enforce the
contract in a court of law, the contract is
Question:
Broker -
Answer:
Cannot bind the insurer and has none of an agent's
authority.
Question:
Captive Agents -
, Answer:
an insurance agent who represents only one
insurance company and who is, in effect, an employee of that company
Question:
Career Agents -
Answer:
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.
Question:
Coinsurance -
Answer:
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.
Question:
Collateral Source Rule -
Answer:
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
Question:
Comparative Negligence -
Answer:
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%.
Question:
Concealment -
Answer:
the intentional withholding of material information,
violates the requirement of utmost good faith even if no specific question arises about that
information.
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Abandonment -
Answer:
Represents the possibility of a loss-or a negative
deviation from a desired outcome.
Question:
Absolute Liability (Strict Liability) -
Answer:
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)
Question:
Actual Cash Value -
Answer:
replacement cost minus depreciation
Question:
Adjuster -
Answer:
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.
Question:
Adverse Selection -
Answer:
A high-risk person benefits more from
insurance, so is more likely to purchase it.
Question:
Aleatory Contract -
Answer:
a contract where the values exchanged may not
be equal but depend on chance (insurance)
,Question:
Attractive Nuissance -
Answer:
a hazardous condition that can attract and
injure children (e.g. a swimming pool)
Question:
Express Authority -
Answer:
The authority granted to an agent by means of
the agent's written contract.
Question:
Implied Authority -
Answer:
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
Question:
Apparent Authority -
Answer:
The authority an agent is believed by third
parties to have because of the behavior of the principal
Question:
Bilateral -
Answer:
When either party to the contract can enforce the
contract in a court of law, the contract is
Question:
Broker -
Answer:
Cannot bind the insurer and has none of an agent's
authority.
Question:
Captive Agents -
, Answer:
an insurance agent who represents only one
insurance company and who is, in effect, an employee of that company
Question:
Career Agents -
Answer:
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.
Question:
Coinsurance -
Answer:
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.
Question:
Collateral Source Rule -
Answer:
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
Question:
Comparative Negligence -
Answer:
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%.
Question:
Concealment -
Answer:
the intentional withholding of material information,
violates the requirement of utmost good faith even if no specific question arises about that
information.
