CFP - FP512 - Module 1 Key Terms
UPDATED ACTUAL Questions and
CORRECT Answers
abandonment - CORRECT ANSWER involves surrendering ownership of damaged
property to the insurance company so that a total loss can be claimed
absolute liability - CORRECT ANSWER standard imposed when a person or organization
is held responsible for any damages, even when there has been no negligence
acceptance - CORRECT ANSWER A second party's unqualified willingness to go along
with the first party's proposal.
actual cash value (ACV) - CORRECT ANSWER replacement cost minus depreciation
adjuster - CORRECT 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.
adverse selection - CORRECT ANSWER occurs when people with higher risk are more
likely to purchase insurance
aleatory contract - CORRECT ANSWER one in which the outcome is controlled by
chance, and the dollars that change hands are often of substantially unequal amounts.
attractive nuisance - CORRECT ANSWER refers to something about a property (ie
swimming pool) that is likely to attract and possibly injure children
authority - CORRECT ANSWER the right to use power
, bilateral - CORRECT ANSWER Contracts under which both parties have made
enforceable promises (I promise to paint the fence by Tuesday, and you promise to pay me $75)
broker - CORRECT ANSWER represents a prospective insured and generally cannot bind
the prospective insured to an insurance contract
captive agents - CORRECT ANSWER sell property and liability insurance for companies
that are known as direct writers.
career agents - CORRECT ANSWER usually life insurance agents in a general agency or a
company-owned office under the agency management or the branch office systems
coinsurance - CORRECT ANSWER the sharing of expenses by the policyholder and the
insurance company
collateral source rule - CORRECT ANSWER A legal doctrine that provides that the
damages owed to a victim should not be reduced because the victim is entitled to recover money
from other sources, such as an insurance policy.
comparative negligence - CORRECT ANSWER A rule in tort law that reduces the
plaintiff's recovery in proportion to the plaintiff's degree of fault, rather than barring recovery
completely; used in the majority of states.
concealment - CORRECT ANSWER intentional withholding of material information
conditional - CORRECT ANSWER the insurance company pays on the condition
consideration - CORRECT ANSWER the act or the payment for the act
contract - CORRECT ANSWER a promise or set of promises that, if breached, are
enforceable by law through remedy or performance
UPDATED ACTUAL Questions and
CORRECT Answers
abandonment - CORRECT ANSWER involves surrendering ownership of damaged
property to the insurance company so that a total loss can be claimed
absolute liability - CORRECT ANSWER standard imposed when a person or organization
is held responsible for any damages, even when there has been no negligence
acceptance - CORRECT ANSWER A second party's unqualified willingness to go along
with the first party's proposal.
actual cash value (ACV) - CORRECT ANSWER replacement cost minus depreciation
adjuster - CORRECT 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.
adverse selection - CORRECT ANSWER occurs when people with higher risk are more
likely to purchase insurance
aleatory contract - CORRECT ANSWER one in which the outcome is controlled by
chance, and the dollars that change hands are often of substantially unequal amounts.
attractive nuisance - CORRECT ANSWER refers to something about a property (ie
swimming pool) that is likely to attract and possibly injure children
authority - CORRECT ANSWER the right to use power
, bilateral - CORRECT ANSWER Contracts under which both parties have made
enforceable promises (I promise to paint the fence by Tuesday, and you promise to pay me $75)
broker - CORRECT ANSWER represents a prospective insured and generally cannot bind
the prospective insured to an insurance contract
captive agents - CORRECT ANSWER sell property and liability insurance for companies
that are known as direct writers.
career agents - CORRECT ANSWER usually life insurance agents in a general agency or a
company-owned office under the agency management or the branch office systems
coinsurance - CORRECT ANSWER the sharing of expenses by the policyholder and the
insurance company
collateral source rule - CORRECT ANSWER A legal doctrine that provides that the
damages owed to a victim should not be reduced because the victim is entitled to recover money
from other sources, such as an insurance policy.
comparative negligence - CORRECT ANSWER A rule in tort law that reduces the
plaintiff's recovery in proportion to the plaintiff's degree of fault, rather than barring recovery
completely; used in the majority of states.
concealment - CORRECT ANSWER intentional withholding of material information
conditional - CORRECT ANSWER the insurance company pays on the condition
consideration - CORRECT ANSWER the act or the payment for the act
contract - CORRECT ANSWER a promise or set of promises that, if breached, are
enforceable by law through remedy or performance
