CPCU 555: All Concepts Exam Practice
Questions And Answers
Educational Objective 1 - ANSWER ✔ - Explain the Property Loss Exposures people face in terms of 1)
assets; 2) causes; 3) financial consequences.
Personal Property Loss Exposure Elements - ANSWER ✔ - 1. Assets exposed to loss (loss types)
2. Cause of loss
3. Financial consequences of loss
Assets Exposed to *Real Property* Loss - ANSWER ✔ - - Land
- Buildings
- Attached structures (pool, shed, flagpole)
- Plants (trees, crops)
- Embedded items in land (minerals, pipes)
Assets Exposed to *Personal Property* Loss - ANSWER ✔ - 1. Dwelling contents
2. High-value articles
3. Rare or antique property
4. Business personal property
5. Motor vehicles, trailers, watercraft, and aircraft
Causes of *Real Property* Loss - ANSWER ✔ - - Fire
- Lightening
- Earthquake
- Wind damage
Causes of *Personal Property* Loss - ANSWER ✔ - - Theft
- Damage
- Lost
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CPCU 555
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,Financial Consequences of PLE (4) - ANSWER ✔ - 1. Reduction in value
2. Increased expenses
3. Lost income
4. Cost to Repair/Replace
Educational Objective 2 - ANSWER ✔ - Liability Loss Exposures occur as a result of the filing of a claim
or lawsuit. This section examines the assets exposed to loss, causes of claims and the source of legal
liability.
Liability Loss Exposures Arise Out Of (4)... - ANSWER ✔ - 1. Property ownership
2. Driving
3. Contractual Agreements
4. Actions of others (e.g. family members)
Assets Exposed to *Liability Loss Exposure* (2) - ANSWER ✔ - 1. Money (as a result of damage
award)
2. Other financial assets
Types of Contractual *Damages* (3) - ANSWER ✔ - 1. General
2. Special
3. Punitive or exemplary
Causes of *Liability Loss Exposure* (2) - ANSWER ✔ - 1. Claim
2. Lawsuit
Types of *Legal* Liability (3) - ANSWER ✔ - 1. Contractual (breach of contract)
2. Tort (breach of duty)
3. Statutory (breach of law)
Sources of Tort Liability (3) - ANSWER ✔ - 1. Negligence (most common)
2. Intentional Torts
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CPCU 555
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,3. Absolute Liability
Legal Requirements of Negligence (4) - ANSWER ✔ - 1. A duty to act
2. Breach of that duty
3. An injury or damage occurs
4. Breach of that duty is a *direct* cause in an *unbroken* chain of events.
List of Intentional Torts (6) - ANSWER ✔ - - Libel -* printed * statement that damages reputation
- Slander - *verbal* statement that damages reputation
- Assault - intentional/unlawful *threat* of bodily harm
- Battery - Unlawful physical contact
- Trespass
- Nuisance - violation of a persons right enjoy use of property
What is Absolute Liability? - ANSWER ✔ - Liability that does not involve proving negligence.
*Example:* Alligator bites neighbor -- negligence need not be proven for aligator owner to be liable.
Financial Consequences of Liability Loss Exposures (5) - ANSWER ✔ - 1. Cost of investigation and
defense
2. Damages
3. Settlement Cost
4. Legal Fees
5. Court Cost
What are the Risks of Settlement? What is the likelihood of Settlement? - ANSWER ✔ - Many cases
are settled out of court as a method to reduce cost. The limit to loss is the *total wealth* of the
responsible party (although some jurisdictions limit claim amounts) including future income.
Educational Objective 3 - ANSWER ✔ - Describe the six steps of the *Risk Management Process *
What is the Risk Management Process? - ANSWER ✔ - Method of *making, implementing, and
monitoring decisions* that minimize the adverse effects of risk on an organization or family.
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CPCU 555
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, Six Steps of Risk Management Process - ANSWER ✔ - *1. Identifying Loss Exposures*
*2. Analyzing Loss Exposures*
3. Examining the Feasibility of RM Techniques
4. Selecting the Appropriate Risk Management Technique
5. Implementing Risk Management Techniques
6. Monitoring Results and Revising Risk Management Process
Bold: Most important steps
Two Sources of Loss Exposure Advice - ANSWER ✔ - - Family members
- Insurance agents
Two most common PLE & LLE Are connected to... - ANSWER ✔ - Home and automobile ownership
How are loss exposures analyzed? (RM Step 2) - ANSWER ✔ - 1) Frequency; 2) Severity; 3) Total
Dollar Losses; 4) Timing.
What is another term for the combining of steps 1 (identify) and 2 (analyze) of the RM process? -
ANSWER ✔ - Assessing Loss Exposures
Orgs Analyze the LE by... - ANSWER ✔ - 1. Loss Frequency
2. Loss Severity
*3. Total Dollar Loss*
4. Timing
Families Analyze the LE by... - ANSWER ✔ - 1. Loss Frequency
2. Loss Severity
3. Total Dollar Limits
4. Timing
How should families/people *Examine the Feasibility of the RM Technique* (Step 3) - ANSWER ✔ -
They should examine all available risk control and risk financing techniques and determine the most
feasible for them.
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CPCU 555
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Questions And Answers
Educational Objective 1 - ANSWER ✔ - Explain the Property Loss Exposures people face in terms of 1)
assets; 2) causes; 3) financial consequences.
Personal Property Loss Exposure Elements - ANSWER ✔ - 1. Assets exposed to loss (loss types)
2. Cause of loss
3. Financial consequences of loss
Assets Exposed to *Real Property* Loss - ANSWER ✔ - - Land
- Buildings
- Attached structures (pool, shed, flagpole)
- Plants (trees, crops)
- Embedded items in land (minerals, pipes)
Assets Exposed to *Personal Property* Loss - ANSWER ✔ - 1. Dwelling contents
2. High-value articles
3. Rare or antique property
4. Business personal property
5. Motor vehicles, trailers, watercraft, and aircraft
Causes of *Real Property* Loss - ANSWER ✔ - - Fire
- Lightening
- Earthquake
- Wind damage
Causes of *Personal Property* Loss - ANSWER ✔ - - Theft
- Damage
- Lost
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CPCU 555
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,Financial Consequences of PLE (4) - ANSWER ✔ - 1. Reduction in value
2. Increased expenses
3. Lost income
4. Cost to Repair/Replace
Educational Objective 2 - ANSWER ✔ - Liability Loss Exposures occur as a result of the filing of a claim
or lawsuit. This section examines the assets exposed to loss, causes of claims and the source of legal
liability.
Liability Loss Exposures Arise Out Of (4)... - ANSWER ✔ - 1. Property ownership
2. Driving
3. Contractual Agreements
4. Actions of others (e.g. family members)
Assets Exposed to *Liability Loss Exposure* (2) - ANSWER ✔ - 1. Money (as a result of damage
award)
2. Other financial assets
Types of Contractual *Damages* (3) - ANSWER ✔ - 1. General
2. Special
3. Punitive or exemplary
Causes of *Liability Loss Exposure* (2) - ANSWER ✔ - 1. Claim
2. Lawsuit
Types of *Legal* Liability (3) - ANSWER ✔ - 1. Contractual (breach of contract)
2. Tort (breach of duty)
3. Statutory (breach of law)
Sources of Tort Liability (3) - ANSWER ✔ - 1. Negligence (most common)
2. Intentional Torts
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CPCU 555
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,3. Absolute Liability
Legal Requirements of Negligence (4) - ANSWER ✔ - 1. A duty to act
2. Breach of that duty
3. An injury or damage occurs
4. Breach of that duty is a *direct* cause in an *unbroken* chain of events.
List of Intentional Torts (6) - ANSWER ✔ - - Libel -* printed * statement that damages reputation
- Slander - *verbal* statement that damages reputation
- Assault - intentional/unlawful *threat* of bodily harm
- Battery - Unlawful physical contact
- Trespass
- Nuisance - violation of a persons right enjoy use of property
What is Absolute Liability? - ANSWER ✔ - Liability that does not involve proving negligence.
*Example:* Alligator bites neighbor -- negligence need not be proven for aligator owner to be liable.
Financial Consequences of Liability Loss Exposures (5) - ANSWER ✔ - 1. Cost of investigation and
defense
2. Damages
3. Settlement Cost
4. Legal Fees
5. Court Cost
What are the Risks of Settlement? What is the likelihood of Settlement? - ANSWER ✔ - Many cases
are settled out of court as a method to reduce cost. The limit to loss is the *total wealth* of the
responsible party (although some jurisdictions limit claim amounts) including future income.
Educational Objective 3 - ANSWER ✔ - Describe the six steps of the *Risk Management Process *
What is the Risk Management Process? - ANSWER ✔ - Method of *making, implementing, and
monitoring decisions* that minimize the adverse effects of risk on an organization or family.
Page | 3
CPCU 555
©®
, Six Steps of Risk Management Process - ANSWER ✔ - *1. Identifying Loss Exposures*
*2. Analyzing Loss Exposures*
3. Examining the Feasibility of RM Techniques
4. Selecting the Appropriate Risk Management Technique
5. Implementing Risk Management Techniques
6. Monitoring Results and Revising Risk Management Process
Bold: Most important steps
Two Sources of Loss Exposure Advice - ANSWER ✔ - - Family members
- Insurance agents
Two most common PLE & LLE Are connected to... - ANSWER ✔ - Home and automobile ownership
How are loss exposures analyzed? (RM Step 2) - ANSWER ✔ - 1) Frequency; 2) Severity; 3) Total
Dollar Losses; 4) Timing.
What is another term for the combining of steps 1 (identify) and 2 (analyze) of the RM process? -
ANSWER ✔ - Assessing Loss Exposures
Orgs Analyze the LE by... - ANSWER ✔ - 1. Loss Frequency
2. Loss Severity
*3. Total Dollar Loss*
4. Timing
Families Analyze the LE by... - ANSWER ✔ - 1. Loss Frequency
2. Loss Severity
3. Total Dollar Limits
4. Timing
How should families/people *Examine the Feasibility of the RM Technique* (Step 3) - ANSWER ✔ -
They should examine all available risk control and risk financing techniques and determine the most
feasible for them.
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CPCU 555
©®
