CPCU 500 Exam Questions and Answers Grade A+
Probability - Answer-The likelihood that an outcome or event will occur.
Pure Risk - Answer-Chance of loss or no loss, but no chance of gain
Speculative Risk - Answer-Chance of loss, no loss, or gain.
Credit Risk - Answer-Risk that customers or other creditors will fail to make promised payments
as they come due.
Subjective Risk - Answer-Perceived amount of risk based on a person or organizations opinoin.
Objective Risk - Answer-Measurable variation in uncertain outcomes based on facts and data.
Diversifiable Risk - Answer-Risk that affects only some indivudals, businesses, or small groups.
Systematic Risk - Answer-Potential for major disruption in function of an entire market or
financial system
Market Risk - Answer-Uncertainty about an investments future value because of potential
changes in the makret for that type of incestment.
Liquidity Risk - Answer-Risk that an asset cannot be sold on short notice with incurring a loss
Risk Source (ISO 31000) - Answer-Element which alone or in combination has the intrinsic
potential to give risk to risk
Risk Mgmt - Answer-Process of making and implementing decisions that will minimize the
adverse effects of accidental losses on an organization.
Loss Exposure - Answer-Any condition or situation that presents possibility of loss, whether or
not actual loss occurs.
Hazard - Answer-Condition that increases frequency or severity of a loss.
Moral Hazard - Answer-Condition that increases the likelihood that a person will intentionall
cause or exaggerate loss.
Morale Hazard - Answer-Condition of carelessness or indifference that increases the frequency
or severity of loss
Physical Hazrd - Answer-Tangible characteristic of property, persons, or operations that tends to
increase frequency or severity of loss
Legal Hazard - Answer-Condition of the legal environment that increases loss frequency or
severity.
, Property loss exposure - Answer-Condition that presents possibility that a person or an
organization will sustain a loss resulting from damage to property in which that person or
organization has a financial interest.
Tangible property - Answer-Property that has physical form
Real Property - Answer-Tangible property consisting of land, all structures permanently attached
to the land, and whatever is growing on the land.
Personal property - Answer-All tangible or intangible property that is not real property
Intangible Property - Answer-Property that has no physical form
Liability Loss Exposure - Answer-Any condition or situation that presents possibility of a claim
alleging legal responsibility of a person or business for injury or damage suffered by another
party.
Personnel loss exposure - Answer-Condition that presents possibility of a loss caused by a
persons death, disability, retirement, or resignation that deprives an organization of the
person's special skill or knowledge that the organization cannot readily replace.
Personal loss exposure - Answer-A condition or situation that presents the possibility of a
financial loss to an individual or family by such causes as death, sickness, injury , or
unemployment.
Net Income loss exposure - Answer-Condition that presents the possibility of loss caused by a
reduction in net income
Pre loss goals - Answer-Goals to be accomplished before a loss, involving social responsibility,
externally imposed goals, reduction of anxiety, and economy of operation.
Post loss goals - Answer-Risk mgmt program that should be in place in the event of a significant
loss. Includes Survival,continuty of operations, profitability, earning stability, social
responsibility, growth.
types of speculative risk - Answer-Price risk and credit risk
Reasons why objective and subjective can differ - Answer-Familiarity and control/consequences
over likelihood/risk awareness
Quadrants of risk - Answer-Hazard/Operational/Strategic/Financial
Consequences of risk - Answer-Expected cost of losses or gains/Expenditures on risk mgmt/cost
of residual uncertainty
Probability - Answer-The likelihood that an outcome or event will occur.
Pure Risk - Answer-Chance of loss or no loss, but no chance of gain
Speculative Risk - Answer-Chance of loss, no loss, or gain.
Credit Risk - Answer-Risk that customers or other creditors will fail to make promised payments
as they come due.
Subjective Risk - Answer-Perceived amount of risk based on a person or organizations opinoin.
Objective Risk - Answer-Measurable variation in uncertain outcomes based on facts and data.
Diversifiable Risk - Answer-Risk that affects only some indivudals, businesses, or small groups.
Systematic Risk - Answer-Potential for major disruption in function of an entire market or
financial system
Market Risk - Answer-Uncertainty about an investments future value because of potential
changes in the makret for that type of incestment.
Liquidity Risk - Answer-Risk that an asset cannot be sold on short notice with incurring a loss
Risk Source (ISO 31000) - Answer-Element which alone or in combination has the intrinsic
potential to give risk to risk
Risk Mgmt - Answer-Process of making and implementing decisions that will minimize the
adverse effects of accidental losses on an organization.
Loss Exposure - Answer-Any condition or situation that presents possibility of loss, whether or
not actual loss occurs.
Hazard - Answer-Condition that increases frequency or severity of a loss.
Moral Hazard - Answer-Condition that increases the likelihood that a person will intentionall
cause or exaggerate loss.
Morale Hazard - Answer-Condition of carelessness or indifference that increases the frequency
or severity of loss
Physical Hazrd - Answer-Tangible characteristic of property, persons, or operations that tends to
increase frequency or severity of loss
Legal Hazard - Answer-Condition of the legal environment that increases loss frequency or
severity.
, Property loss exposure - Answer-Condition that presents possibility that a person or an
organization will sustain a loss resulting from damage to property in which that person or
organization has a financial interest.
Tangible property - Answer-Property that has physical form
Real Property - Answer-Tangible property consisting of land, all structures permanently attached
to the land, and whatever is growing on the land.
Personal property - Answer-All tangible or intangible property that is not real property
Intangible Property - Answer-Property that has no physical form
Liability Loss Exposure - Answer-Any condition or situation that presents possibility of a claim
alleging legal responsibility of a person or business for injury or damage suffered by another
party.
Personnel loss exposure - Answer-Condition that presents possibility of a loss caused by a
persons death, disability, retirement, or resignation that deprives an organization of the
person's special skill or knowledge that the organization cannot readily replace.
Personal loss exposure - Answer-A condition or situation that presents the possibility of a
financial loss to an individual or family by such causes as death, sickness, injury , or
unemployment.
Net Income loss exposure - Answer-Condition that presents the possibility of loss caused by a
reduction in net income
Pre loss goals - Answer-Goals to be accomplished before a loss, involving social responsibility,
externally imposed goals, reduction of anxiety, and economy of operation.
Post loss goals - Answer-Risk mgmt program that should be in place in the event of a significant
loss. Includes Survival,continuty of operations, profitability, earning stability, social
responsibility, growth.
types of speculative risk - Answer-Price risk and credit risk
Reasons why objective and subjective can differ - Answer-Familiarity and control/consequences
over likelihood/risk awareness
Quadrants of risk - Answer-Hazard/Operational/Strategic/Financial
Consequences of risk - Answer-Expected cost of losses or gains/Expenditures on risk mgmt/cost
of residual uncertainty
