CPCU 500 Exam Questions and Answers Grade A+
probability - Answer-the likelihood that an outcome or event will occur
pure risk - Answer-a chance of loss or no loss, but no chance of gain
speculative risk - Answer-a chance of loss, no loss or gain
credit risk - Answer-the risk that customers or other creditors will fail to make promised
payments as they come due
subjective risk - Answer-the perceived amount of risk based on an individuals or organizations
opinion
objective risk - Answer-the measurable variation in uncertain outcomes based on facts and data
diversifiable risk - Answer-a risk that affects only some individuals, businesses or small groups
systemic risk - Answer-the potential for major disruption in the function of an entire market or
financial system
market risk - Answer-uncertainty about an investments future value because of potential
changes in the market for that type of investment
liquidity risk - Answer-the risk that an asset cannot be sold on short notice without incurring
loss
risk source (ISO3100) - Answer-element ehich alone or in combo has the intrinsic potential to
give rise to risk
risk management - Answer-the 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 a possibility of loss whether or
not an actual loss occurs
hazard - Answer-a condition that increases the frequency or severity of a loss
moral hazard - Answer-a condition that increases the likelihood that a person will intentionally
cause or exaggerate a loss
morale hazard (attitudinal hazard) - Answer-a condition of carelessness or indifference that
increases the frequency or severity of a loss
physical hazard - Answer-a tangible characteristic of property. persons, or operations that tends
to increase the frequency or severity of a loss
, legal hazard - Answer-a condition of the legal environment that increases loss frequency or
severity
property loss exposure - Answer-a condition that presents the possibility that a person or an
organization will sustain a liss resulting from damage (including destruction, taking, or loss of
use) to property in which that person or organization has a financial interest
tangible property - Answer-property that has physical form
real property (realty) - Answer-tangible property consiting of land, all structures permanently
attached to the land, and whatever is growing on the land
personal property - Answer-all tangible property that is not real property
intangible property - Answer-propery that has no physical form
liability loss exposure - Answer-any condition or situation that presents the possibility of a claim
alleging legal rsponsibility if a person or business for injury or damage suffered by another party
personnel loss exposure - Answer-a condition that presents the possibility of loss caused by a
persons death, diability or retirement, or resignation that deprives an organization of the
persons special skill or knowledge that the organization cannot readily replace
personal loss exposure - Answer-any condition or situation that presents the possibility of
financial loss to an individual or a family by such causes as death, sickness, injury or
unemployment
net income loss exposure - Answer-a 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
post-loss goals - Answer-risk management program goals that should be in place in the event of
a significant loss
balance sheet - Answer-the financial statement that reports the assets, liabilities, and the
owners equity of an organization as of a specific date
income statement - Answer-the financial statement that reports an organizations profit or loss
for a specific period by comparing the revenues generated with the expenses incurred to
produce those revenues
statement of cash flows - Answer-the financial statement that summarizes the cash effects of an
organizations operating, investing and financing activities during a specific period
probability - Answer-the likelihood that an outcome or event will occur
pure risk - Answer-a chance of loss or no loss, but no chance of gain
speculative risk - Answer-a chance of loss, no loss or gain
credit risk - Answer-the risk that customers or other creditors will fail to make promised
payments as they come due
subjective risk - Answer-the perceived amount of risk based on an individuals or organizations
opinion
objective risk - Answer-the measurable variation in uncertain outcomes based on facts and data
diversifiable risk - Answer-a risk that affects only some individuals, businesses or small groups
systemic risk - Answer-the potential for major disruption in the function of an entire market or
financial system
market risk - Answer-uncertainty about an investments future value because of potential
changes in the market for that type of investment
liquidity risk - Answer-the risk that an asset cannot be sold on short notice without incurring
loss
risk source (ISO3100) - Answer-element ehich alone or in combo has the intrinsic potential to
give rise to risk
risk management - Answer-the 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 a possibility of loss whether or
not an actual loss occurs
hazard - Answer-a condition that increases the frequency or severity of a loss
moral hazard - Answer-a condition that increases the likelihood that a person will intentionally
cause or exaggerate a loss
morale hazard (attitudinal hazard) - Answer-a condition of carelessness or indifference that
increases the frequency or severity of a loss
physical hazard - Answer-a tangible characteristic of property. persons, or operations that tends
to increase the frequency or severity of a loss
, legal hazard - Answer-a condition of the legal environment that increases loss frequency or
severity
property loss exposure - Answer-a condition that presents the possibility that a person or an
organization will sustain a liss resulting from damage (including destruction, taking, or loss of
use) to property in which that person or organization has a financial interest
tangible property - Answer-property that has physical form
real property (realty) - Answer-tangible property consiting of land, all structures permanently
attached to the land, and whatever is growing on the land
personal property - Answer-all tangible property that is not real property
intangible property - Answer-propery that has no physical form
liability loss exposure - Answer-any condition or situation that presents the possibility of a claim
alleging legal rsponsibility if a person or business for injury or damage suffered by another party
personnel loss exposure - Answer-a condition that presents the possibility of loss caused by a
persons death, diability or retirement, or resignation that deprives an organization of the
persons special skill or knowledge that the organization cannot readily replace
personal loss exposure - Answer-any condition or situation that presents the possibility of
financial loss to an individual or a family by such causes as death, sickness, injury or
unemployment
net income loss exposure - Answer-a 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
post-loss goals - Answer-risk management program goals that should be in place in the event of
a significant loss
balance sheet - Answer-the financial statement that reports the assets, liabilities, and the
owners equity of an organization as of a specific date
income statement - Answer-the financial statement that reports an organizations profit or loss
for a specific period by comparing the revenues generated with the expenses incurred to
produce those revenues
statement of cash flows - Answer-the financial statement that summarizes the cash effects of an
organizations operating, investing and financing activities during a specific period
