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CFP: INSURANCE PLANNING QUESTIONS
WITH DETAILED VERIFIED 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 Ans: 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 Ans: Adverse Selection
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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 Ans: 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 Ans:
Moral hazard
The indifference a person has towards loss because of insurance. e.g.
leaving the keys in your car and the car running Ans: 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 Ans: A peril is the proximate or actual cause of a loss
A proximate cause of a loss Ans: Peril
A condition that creates or increases the likelihood of a loss occurring
Ans: Hazard
Which of the following is not a requisite for an insurable risk?
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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 Ans: 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 Ans: 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
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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 Ans: 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 Ans: 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 Ans: 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
CFP: INSURANCE PLANNING QUESTIONS
WITH DETAILED VERIFIED 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 Ans: 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 Ans: Adverse Selection
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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 Ans: 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 Ans:
Moral hazard
The indifference a person has towards loss because of insurance. e.g.
leaving the keys in your car and the car running Ans: 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 Ans: A peril is the proximate or actual cause of a loss
A proximate cause of a loss Ans: Peril
A condition that creates or increases the likelihood of a loss occurring
Ans: Hazard
Which of the following is not a requisite for an insurable risk?
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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 Ans: 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 Ans: 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
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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 Ans: 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 Ans: 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 Ans: 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
