FPQP - Module 4 Exam Questions with Correct Answers 100% Verified By Experts| Latest
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The process of deciding how much and what kind of insurance to buy is called
A) insurance management.
B) financial planning.
C) risk management.
D) life insurance planning. A) insurance management.
Explanation:
The process of deciding what kind of insurance to buy is called insurance management. Risk
management is broader than insurance management because it includes covering risk in
multiple ways. Insurance is one of them. Insurance management can involve all types of
insurance and is not limited to life insurance.
LO 4-1
Liability risk is
A) avoidable with good behavior.
B) only a concern for wealthy individuals.
C) one form of pure risk.
D) one form of speculative risk. C) one form of pure risk.
Explanation:
Liability risk is just one form of pure risk. Speculative risk can result in either a gain or a loss;
liability risk has only downside risk. Good behavior can reduce the possibility of being sued, but
it cannot eliminate it. While liability risk is more of a concern for wealthy individuals, it is also a
concern for almost anyone since anyone can get sued.
LO 4-1
Which of these is NOT a requirement for an insurable risk from the insurance company's
perspective?
, A) The loss must be accidental.
B) The law of large numbers must apply.
C) The loss must be catastrophic for the insurance company.
D) The loss must be measurable. C) The loss must be catastrophic for the insurance
company.
Explanation:
The loss cannot be catastrophic for the insurance company for a risk to be considered an
insurable risk. All of the others factors are requirements.
LO 4-2
All of the following statements regarding insurable interest are correct except
A) the purchaser of a life insurance policy must have an insurable interest in the insured when
the policy is purchased.
B) with property insurance, the insurable interest must exist at the time of claim.
C) the beneficiary of a life insurance policy must have an insurable interest in the insured when
the insured dies.
D) the beneficiary is considered to have an insurable interest in the life of his spouse. C) the
beneficiary of a life insurance policy must have an insurable interest in the insured when the
insured dies.
Explanation
The beneficiary of a life insurance policy must have an insurable interest in the insured when
the policy is purchased. All of the other statements are correct.
LO 4-2
Which of the following is NOT one of the basic, or standard, sections of an insurance policy?
A) Conditions
B) Declarations
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The process of deciding how much and what kind of insurance to buy is called
A) insurance management.
B) financial planning.
C) risk management.
D) life insurance planning. A) insurance management.
Explanation:
The process of deciding what kind of insurance to buy is called insurance management. Risk
management is broader than insurance management because it includes covering risk in
multiple ways. Insurance is one of them. Insurance management can involve all types of
insurance and is not limited to life insurance.
LO 4-1
Liability risk is
A) avoidable with good behavior.
B) only a concern for wealthy individuals.
C) one form of pure risk.
D) one form of speculative risk. C) one form of pure risk.
Explanation:
Liability risk is just one form of pure risk. Speculative risk can result in either a gain or a loss;
liability risk has only downside risk. Good behavior can reduce the possibility of being sued, but
it cannot eliminate it. While liability risk is more of a concern for wealthy individuals, it is also a
concern for almost anyone since anyone can get sued.
LO 4-1
Which of these is NOT a requirement for an insurable risk from the insurance company's
perspective?
, A) The loss must be accidental.
B) The law of large numbers must apply.
C) The loss must be catastrophic for the insurance company.
D) The loss must be measurable. C) The loss must be catastrophic for the insurance
company.
Explanation:
The loss cannot be catastrophic for the insurance company for a risk to be considered an
insurable risk. All of the others factors are requirements.
LO 4-2
All of the following statements regarding insurable interest are correct except
A) the purchaser of a life insurance policy must have an insurable interest in the insured when
the policy is purchased.
B) with property insurance, the insurable interest must exist at the time of claim.
C) the beneficiary of a life insurance policy must have an insurable interest in the insured when
the insured dies.
D) the beneficiary is considered to have an insurable interest in the life of his spouse. C) the
beneficiary of a life insurance policy must have an insurable interest in the insured when the
insured dies.
Explanation
The beneficiary of a life insurance policy must have an insurable interest in the insured when
the policy is purchased. All of the other statements are correct.
LO 4-2
Which of the following is NOT one of the basic, or standard, sections of an insurance policy?
A) Conditions
B) Declarations
