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CFP - FP512 - MODULE 1 KEY TERMS
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
abandonment Ans: involves surrendering ownership of damaged
property to the insurance company so that a total loss can be claimed
absolute liability Ans: standard imposed when a person or organization
is held responsible for any damages, even when there has been no
negligence
acceptance Ans: A second party's unqualified willingness to go along
with the first party's proposal.
actual cash value (ACV) Ans: replacement cost minus depreciation
adjuster Ans: 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 Ans: occurs when people with higher risk are more
likely to purchase insurance
aleatory contract Ans: one in which the outcome is controlled by chance,
and the dollars that change hands are often of substantially unequal
amounts.
attractive nuisance Ans: refers to something about a property (ie
swimming pool) that is likely to attract and possibly injure children
authority Ans: the right to use power
bilateral Ans: Contracts under which both parties have made
enforceable promises (I promise to paint the fence by Tuesday, and you
promise to pay me $75)
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broker Ans: represents a prospective insured and generally cannot bind
the prospective insured to an insurance contract
captive agents Ans: sell property and liability insurance for companies
that are known as direct writers.
career agents Ans: usually life insurance agents in a general agency or a
company-owned office under the agency management or the branch
office systems
coinsurance Ans: the sharing of expenses by the policyholder and the
insurance company
collateral source rule Ans: 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 Ans: 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 Ans: intentional withholding of material information
conditional Ans: the insurance company pays on the condition
consideration Ans: the act or the payment for the act
contract Ans: a promise or set of promises that, if breached, are
enforceable by law through remedy or performance
contract disputes Ans: times when two parties to a contract are in
conflict that cannot be resolved without the legal system
contract law Ans: risk of liability - related to the asset or activity
contract of adhesion Ans: is one that is prepared by one party and either
accepted or rejected by the other
CFP - FP512 - MODULE 1 KEY TERMS
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
abandonment Ans: involves surrendering ownership of damaged
property to the insurance company so that a total loss can be claimed
absolute liability Ans: standard imposed when a person or organization
is held responsible for any damages, even when there has been no
negligence
acceptance Ans: A second party's unqualified willingness to go along
with the first party's proposal.
actual cash value (ACV) Ans: replacement cost minus depreciation
adjuster Ans: 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 Ans: occurs when people with higher risk are more
likely to purchase insurance
aleatory contract Ans: one in which the outcome is controlled by chance,
and the dollars that change hands are often of substantially unequal
amounts.
attractive nuisance Ans: refers to something about a property (ie
swimming pool) that is likely to attract and possibly injure children
authority Ans: the right to use power
bilateral Ans: Contracts under which both parties have made
enforceable promises (I promise to paint the fence by Tuesday, and you
promise to pay me $75)
, Page | 2
broker Ans: represents a prospective insured and generally cannot bind
the prospective insured to an insurance contract
captive agents Ans: sell property and liability insurance for companies
that are known as direct writers.
career agents Ans: usually life insurance agents in a general agency or a
company-owned office under the agency management or the branch
office systems
coinsurance Ans: the sharing of expenses by the policyholder and the
insurance company
collateral source rule Ans: 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 Ans: 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 Ans: intentional withholding of material information
conditional Ans: the insurance company pays on the condition
consideration Ans: the act or the payment for the act
contract Ans: a promise or set of promises that, if breached, are
enforceable by law through remedy or performance
contract disputes Ans: times when two parties to a contract are in
conflict that cannot be resolved without the legal system
contract law Ans: risk of liability - related to the asset or activity
contract of adhesion Ans: is one that is prepared by one party and either
accepted or rejected by the other
