CFP: Insurance Planning UPDATED
ACTUAL Questions and CORRECT
Answers
1. Value exchanged between parties may not be equal
2. The wording of insurance contracts is non-negotiable
3. Insurance contracts may be canceled if payment is not received
4. Only one of the parties to the contract is bound by a promise
Adhesion
Aleatory
Unilateral
Conditional - CORRECT ANSWER 1. Aleatory
2. Adhesion
3. Conditional
4. Unilateral
The tendency for individuals of higher than average risk to seek out or purchase insurance
policies is?
Peril
Hazard
Law of Large Numbers
Adverse Selection - CORRECT ANSWER Adverse Selection
The underwriter attempts to manage adverse selection and minimize policy issuance to less
desirable applicants.
,What type of hazard results from the indifference a person has to the potential loss because he or
she already has insurance?
Peril
Physical Hazard
Moral Hazard
Morale Hazard - CORRECT ANSWER Morale Hazard
Moral hazard is a character flaw or dishonesty. e.g. burning your own house down.
A character flaw or dishonesty. e.g. burning your own house down - CORRECT
ANSWER Moral hazard
The indifference a person has towards loss because of insurance. e.g. leaving the keys in your car
and the car running - CORRECT ANSWER Morale hazard
Which of the following is correct regarding a peril and hazard?
A hazard is the proximate or actual cause of a loss
A peril is the proximate or actual cause of a loss
A peril is the condition that creates or increases the likelihood of a loss occurring
None of the above - CORRECT ANSWER A peril is the proximate or actual cause of a
loss
A proximate cause of a loss - CORRECT ANSWER Peril
A condition that creates or increases the likelihood of a loss occurring - CORRECT
ANSWER Hazard
,Which of the following is not a requisite for an insurable risk?
A large number of homogeneous exposure units must exist
Insured losses must be accidental from the insured's standpoint
Insured losses must be measurable and determinable
Loss must not pose a catastrophic risk for the insured - CORRECT ANSWER Loss must
not pose a catastrophic risk for the insured
Loss must not pose a catastrophic risk for the insurer.
All others are a requisite for an insurable risk.
The principle of indemnity suggests that:
A. A person is entitled to compensation only to the extent that financial loss has been suffered
B. Insured cannot indemnify himself from both the insurance company and a negligent third
party for the same claim
C. The insured must be subject to emotional or financial hardship resulting from the loss
D. The insured and insurer must both be forthcoming with all relevant facts about the insured
risk and coverage provided for that risk - CORRECT ANSWER A person is entitled to
compensation only to the extent that financial loss has been suffered
B describes subrogation.
C describes an insurable interest
D describes concealment
The subrogation clause means that:
A person is entitled to compensation only to the extent that financial loss has been suffered
Insured cannot indemnify himself from both the insurance company and a negligent third party
for the same claim
, The insured must be subject to emotional or financial hardship resulting from the loss
The insured and insurer must both be forthcoming with all relevant facts about the insured risk
and coverage provided for that risk - CORRECT ANSWER Insured cannot indemnify
himself from both the insurance company and a negligent third party for the same claim
The insurance company can collect against a negligent third party, after paying the claim.
When must an insurable interest exist for a property insurance claim
At the policy inception and time of loss
At the policy inception only
At the time of the loss
Either at the policy inception or at the time of the loss - CORRECT ANSWER At the
policy inception and time of loss
When must an insurable interest exist for a life insurance claim
At the policy inception and time of loss
At the policy inception only
At the time of the loss
Either at the policy inception or at the time of the loss - CORRECT ANSWER At the
policy inception only
When the insured is silent to a fact that is material to the risk being insured, what has occurred?
Breach of Warranty
Misrepresentation
Concealment
Breach of Indemnity - CORRECT ANSWER Concealment
ACTUAL Questions and CORRECT
Answers
1. Value exchanged between parties may not be equal
2. The wording of insurance contracts is non-negotiable
3. Insurance contracts may be canceled if payment is not received
4. Only one of the parties to the contract is bound by a promise
Adhesion
Aleatory
Unilateral
Conditional - CORRECT ANSWER 1. Aleatory
2. Adhesion
3. Conditional
4. Unilateral
The tendency for individuals of higher than average risk to seek out or purchase insurance
policies is?
Peril
Hazard
Law of Large Numbers
Adverse Selection - CORRECT ANSWER Adverse Selection
The underwriter attempts to manage adverse selection and minimize policy issuance to less
desirable applicants.
,What type of hazard results from the indifference a person has to the potential loss because he or
she already has insurance?
Peril
Physical Hazard
Moral Hazard
Morale Hazard - CORRECT ANSWER Morale Hazard
Moral hazard is a character flaw or dishonesty. e.g. burning your own house down.
A character flaw or dishonesty. e.g. burning your own house down - CORRECT
ANSWER Moral hazard
The indifference a person has towards loss because of insurance. e.g. leaving the keys in your car
and the car running - CORRECT ANSWER Morale hazard
Which of the following is correct regarding a peril and hazard?
A hazard is the proximate or actual cause of a loss
A peril is the proximate or actual cause of a loss
A peril is the condition that creates or increases the likelihood of a loss occurring
None of the above - CORRECT ANSWER A peril is the proximate or actual cause of a
loss
A proximate cause of a loss - CORRECT ANSWER Peril
A condition that creates or increases the likelihood of a loss occurring - CORRECT
ANSWER Hazard
,Which of the following is not a requisite for an insurable risk?
A large number of homogeneous exposure units must exist
Insured losses must be accidental from the insured's standpoint
Insured losses must be measurable and determinable
Loss must not pose a catastrophic risk for the insured - CORRECT ANSWER Loss must
not pose a catastrophic risk for the insured
Loss must not pose a catastrophic risk for the insurer.
All others are a requisite for an insurable risk.
The principle of indemnity suggests that:
A. A person is entitled to compensation only to the extent that financial loss has been suffered
B. Insured cannot indemnify himself from both the insurance company and a negligent third
party for the same claim
C. The insured must be subject to emotional or financial hardship resulting from the loss
D. The insured and insurer must both be forthcoming with all relevant facts about the insured
risk and coverage provided for that risk - CORRECT ANSWER A person is entitled to
compensation only to the extent that financial loss has been suffered
B describes subrogation.
C describes an insurable interest
D describes concealment
The subrogation clause means that:
A person is entitled to compensation only to the extent that financial loss has been suffered
Insured cannot indemnify himself from both the insurance company and a negligent third party
for the same claim
, The insured must be subject to emotional or financial hardship resulting from the loss
The insured and insurer must both be forthcoming with all relevant facts about the insured risk
and coverage provided for that risk - CORRECT ANSWER Insured cannot indemnify
himself from both the insurance company and a negligent third party for the same claim
The insurance company can collect against a negligent third party, after paying the claim.
When must an insurable interest exist for a property insurance claim
At the policy inception and time of loss
At the policy inception only
At the time of the loss
Either at the policy inception or at the time of the loss - CORRECT ANSWER At the
policy inception and time of loss
When must an insurable interest exist for a life insurance claim
At the policy inception and time of loss
At the policy inception only
At the time of the loss
Either at the policy inception or at the time of the loss - CORRECT ANSWER At the
policy inception only
When the insured is silent to a fact that is material to the risk being insured, what has occurred?
Breach of Warranty
Misrepresentation
Concealment
Breach of Indemnity - CORRECT ANSWER Concealment
