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CPCU 500, Questions Set, Chapters 1 - 8 with verified answers, Exams of Financial Management

CPCU 500, Questions Set, Chapters 1 - 8 with verified answers

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2024/2025

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CPCU 500, Questions Set, Chapters 1 - 8 with
verified answers
Key quiz
. |What |is |insurable |interest
2. |When |must |insurable |interest |exist
3. |Why |require |insurable |interest
4. |What |is |the |legal |basis |of |insurable |interest
5. |What |happens |when |insurable |interest |overlap
Problems |associated |with |maintain |insurance |to |value |- |correct |answer |-1. |The |amount |of |insurance |
required |to |maintain |insurance |to |value |is |based |on |the |property's |value |at |the |time |of |loss, |but |the |
limit |is |chosen |at |the |time |of |policy |inception
2. |The |insured |often |selects |the |policy |limits |based |on |his |best |guess, |not |on |a |valid |appraisal.
3. |Even |with |an |appraisal, |the |true |insurable |value |at |the |time |of |loss |cannot |be |measured |exactly |
until |the |property |is |actually |repaired |or |replaced
4. |Values |fluctuate |over |time
Insurance |buyers |can |minimize |those |four |problems |by |- |correct |answer |-1. |Using |a |professional |
appraiser |to |determine |the |current |replacement |cost |value |and |then |reappraising |the |property |every |
few |years
2. |Adjusting |the |appraisal |annually |using |indexes |and/or |a |record |of |additions |and |deletions
3. |Reviewing |and |revising |limits |periodically
4. |Using |appropriate |coverage |options |such |as |
|Agreed |value |optional |coverage
|Inflation |guard |protection
|Peak |season |endorsement
Approaches |used |in |property |insurance |to |value |property |- |correct |answer |-1. |actual |cash |value
2. |replacement |cost
3. |agreed |value |approach
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Download CPCU 500, Questions Set, Chapters 1 - 8 with verified answers and more Exams Financial Management in PDF only on Docsity!

CPCU 500, Questions Set, Chapters 1 - 8 with

verified answers

Key quiz

. |What |is |insurable |interest

  1. |When |must |insurable |interest |exist
  2. |Why |require |insurable |interest
  3. |What |is |the |legal |basis |of |insurable |interest
  4. |What |happens |when |insurable |interest |overlap Problems |associated |with |maintain |insurance |to |value |- |correct |answer |-1. |The |amount |of |insurance | required |to |maintain |insurance |to |value |is |based |on |the |property's |value |at |the |time |of |loss, |but |the | limit |is |chosen |at |the |time |of |policy |inception
  5. |The |insured |often |selects |the |policy |limits |based |on |his |best |guess, |not |on |a |valid |appraisal.
  6. |Even |with |an |appraisal, |the |true |insurable |value |at |the |time |of |loss |cannot |be |measured |exactly | until |the |property |is |actually |repaired |or |replaced
  7. |Values |fluctuate |over |time Insurance |buyers |can |minimize |those |four |problems |by |- |correct |answer |-1. |Using |a |professional | appraiser |to |determine |the |current |replacement |cost |value |and |then |reappraising |the |property |every | few |years
  8. |Adjusting |the |appraisal |annually |using |indexes |and/or |a |record |of |additions |and |deletions
  9. |Reviewing |and |revising |limits |periodically
  10. |Using |appropriate |coverage |options |such |as | |Agreed |value |optional |coverage |Inflation |guard |protection |Peak |season |endorsement Approaches |used |in |property |insurance |to |value |property |- |correct |answer |-1. |actual |cash |value
  11. |replacement |cost
  12. |agreed |value |approach
  1. |functional |value Valuation |of |Liability |Losses |are |typically |based |on |- |correct |answer |-1. |The |relevant |policy |provisions | and |
  2. |The |extent |of |the |bodily |injury |and/or |property |damage |to |others The |most |the |insurer |will |pay |is |the |lesser |of |- |correct |answer |-1. |The |applicable |policy |limit
  3. |The |compensable |amount |of |the |loss Purposes |of |deductibles |- |correct |answer |-1. |To |reduce |the |insurer's |cost |by |eliminating |the | inefficiencies |of |dollar |trading |and |eliminating |insurer |loss |settlement |and |other |administrative | expense |for |loss |under |the |deductable.
  4. |To |encourage |risk |control
  5. |To |reduce |the |morale |and |moral |hazard |incentive How |deductibles |are |handled |in |liability |insurance: |the |insurer |- |correct |answer |-1. |Defends |the |claim | on |a |first |- |dollar |basis
  6. |Pays |all |covered |losses
  7. |Bills |the |insured |for |the |amount |of |losses |up |to |the |deductible. Limited |use |of |liability |deductibles |- |correct |answer |-1. |The |insurer |wants |the |insured |to |report |every | claim |and |not |play |adjuster |and |attorney. |Simply, |the |insurer |wants |to |control |the |claim |settlement.
  8. |The |premium |credit |would |be |small
  9. |Few |people |sue |for |small |amounts
  10. |The |insurer |must |try |to |collect |the |deductible |amount |from |the |insured. Other |sources |of |recovery |that |affect |amounts |payable |- |correct |answer |-1. |Noninsurance | agreements, |warranties, |guarantees, |lease |agreements, |service |agreements |etc.
  11. |Third |parties
  12. |Other |insurance |in |the |same |policy
  13. |Other |insurance |in |a |similar |policy
  1. |Pre-printed |Policy
  2. |Manuscripted |Policy A |Self |Contained |Policy |Can |Be |Either |- |correct |answer |-1. |Mono-line |Policy
  3. |Package |Policy A |Modular |Policy |Does |- |correct |answer |-1. |Minimizes |gaps |and |overlaps
  4. |Provides |consistent |terminology |and |definitions
  5. |Uses |fewer |forms
  6. |Makes |underwriting |more |efficient
  7. |Reduces |adverse |selection |when |the |same |insurer |provides |several |types |of |insurance |for |the |same |insured
  8. |Results |in |a |package |discount |when |several |coverage's |are |included |in |the |same |policy. Many |insurers |develop |their |own |pre-printed |nonstandard |policies |for |- |correct |answer |-1. |High | volume |lines |of |insurance
  9. |Coverage's |in |which |the |insurers |specialize Types |of |documents |that |may |be |included |in |insurance |policies. |- |correct |answer |-1. |Completed | applications
  10. |Endorsements
  11. |Insurer's |bylaws |and |relevant |statutes
  12. |Insurer's |rating |manual |
  13. |Miscellaneous |documents Parts |of |a |property |- |liability |policy |- |correct |answer |-1. |Declarations
  14. |Definitions
  15. |Insuring |agreements
  16. |Conditions
  17. |Exclusions
  1. |Miscellaneous |provisions Two |broad |categories |of |insuring |agreements |- |correct |answer |-1. |Comprehensive |insuring | agreements |- |provide |broad |coverage |that |is |classified |and |limited |by |definitions |and |exclusions.
  2. |Limited |insuring |agreements |- |restrict |coverage |to |certain |causes |of |loss |or |certain |situations. DICED |- |correct |answer |-1. |Declarations
  3. |Insuring |agreements
  4. |Conditions
  5. |Exclusions
  6. |Definitions Reasons |for |policy |exclusions |- |correct |answer |-1. |Eliminate |uninsurable |loss |exposures
  7. |Help |control |moral |hazards
  8. |Help |control |altitudinal |hazards, |aka |morale |hazards
  9. |Eliminate |coverage |duplications |between |standard |policies
  10. |Eliminate |unneeded |coverage |for |typical |purchasers
  11. |Eliminate |coverage |that |requires |special |rating |or |underwriting |treatment
  12. |Keep |premiums |more |affordable. Pre-Loss |Policy |Analysis |- |correct |answer |-determines |what |losses |would |be |covered. |Relies |on | scenario |analysis |to |determine |what |losses |might |occur |under |different |scenarios |and |then |to | compare |the |provisions |of |the |policy |against |those |possible |losses. |The |sources |used |for |an |insured's | scenario |analysis |include:
  13. |the |insured's |past |loss |experience
  14. |the |experiences |of |friends |and |relatives
  15. |insurance |producers. Post-Loss |Policy |Analysis |- |correct |answer |-determines |if |that |particular |loss |is |covered. |The |primary | method |of |the |analysis |is |the |DICED |method. |After |using |the |DICED |method |if |the |insurer |determines | the |claim |is |covered, |it |must |then |determine |how |much |is |payable |under |the |policy.
  1. |Independent |and |not |catastrophic
  2. |Economic |feasibility Government |insurance |programs |vary |based |on |- |correct |answer |-1. |their |purpose
  3. |the |level |of |government |involvement
  4. |whether |the |program |is |run |at |the |federal |or |at |the |state |level. Reasons |for |government |insurance |programs |- |correct |answer |-1. |To |fill |unmet |insurance |needs
  5. |To |create |efficiencies |and |provide |convenience
  6. |To |force |people |to |buy |certain |types |of |insurance
  7. |To |achieve |social |goals. Possible |Levels |of |Government |Involvement |- |correct |answer |-1. |Exclusive |insurer
  8. |Partner |with |private |insurers
  9. |Competitor |with |private |insurers Property-Liability |Insurance |Offered |by |the |Federal |Government |- |correct |answer |-1. |National |Flood | Insurance |Program
  10. |Terrorism |Risk |Insurance |Program
  11. |Federal |Crop |Insurance Property-Liability |Insurance |Offered |by |State |Governments |- |correct |answer |-1. |Fair |Access |to | Insurance |Requirements |(FAIR) |plans.
  12. |Workers' |compensation |insurance
  13. |Beach |and |windstorm |plans
  14. |Residual |auto |plans Enterprise |Risk |Management |Encompasses |- |correct |answer |-1. |Pure |Risk
  15. |Speculative |Risk

Significant |differences |between |ERM |and |Traditional |RM |- |correct |answer |-1. |Risks |considered

  1. |Strategic |integration
  2. |Performance |Measurement
  3. |Organizational |Structure Steps |to |integrate |ERM |into |Strategic |planning |- |correct |answer |-1. |Identify |Risk
  4. |Analyze |and |prioritize |critical |risk
  5. |Treat |Critical |Risks
  6. |Monitor |and |Review |Critical |Risks Considerations |in |formulating |ERM |goals |include |- |correct |answer |-1. |the |firm's |tolerance |for |risk
  7. |the |reason |for |creating |the |ERM |program
  8. |the |organizational |need |for |the |ERM |program
  9. |the |intended |scope |of |the |ERM |program
  10. |the |ERM's |role |in |meeting |the |firm's |strategic |goals
  11. |the |firm's |definition |of |ERM
  12. |how |the |firm's |culture |will |affect |ERM |implementation. Techniques |for |treating |risk |to |strategy |- |correct |answer |-1. |Avoidance |- |eliminate |the |cause |of |the | risk |or |its |consequences.
  13. |Acceptance |- |plan |ways |to |deal |with |the |risk |if |it |occurs.
  14. |Transfer |- |assign |risk |management |responsibility |to |a |third |party.
  15. |Mitigate |- |institute |activities |to |reduce |the |probability, |the |financial |impact, |and/or |timing |of |the | event.
  16. |Optimize |/ |exploit |- |create |plans |to |optimize |the |positive |outcomes |of |opportunities. Considerations |in |formulating |ERM |goals |include |- |correct |answer |-1. |The |firm's |tolerance |for |risk
  17. |The |reason |for |creating |the |ERM |program

Types |of |Transfer |- |correct |answer |-1. |Insurance

  1. |Alternative |risk |transfer |(ART) Advantages |of |transfer |- |correct |answer |-1. |Reduces |the |financial |uncertainty |of |losses
  2. |Reduces |variability |in |cash |flows
  3. |Provides |ancillary |Services
  4. |Avoids |adverse |employee |and |public |relations Factors |when |choosing |a |risk |financing |measure |- |correct |answer |-1. |Compatibility |with |risk |financing | goals
  5. |Loss |exposure |characteristics
  6. |Organization |specific |characteristics Risk |Financing |Measures |- |correct |answer |-1. |Guaranteed |cost |insurance
  7. |Self |Insurance
  8. |Large |Deductible |Plan
  9. |Captive |Insurer
  10. |Finite |Risk |Insurance |Plan
  11. |Pool
  12. |Retrospective |Rating |Plan
  13. |Hold |Harmless |Agreement
  14. |Capital |market |Solutions Special |Types |of |Group |Captives |- |correct |answer |-1. |Risk |Retention |Group |(RRG)
  15. |Rent |a |captive
  16. |Protected |Cell |Company |(PCC) Risk |Control |Techniques |- |correct |answer |-1. |Avoidance
  1. |Loss |Prevention
  2. |Loss |Reduction
  3. |Separation
  4. |Duplication
  5. |Diversification Risk |Control |Goals |- |correct |answer |-1. |Implement |Effective |and |Efficient |Risk |Control |Measures
  6. |Comply |With |Legal |Requirements
  7. |Promote |Life |Safety
  8. |Ensure |Business |Continuity Steps |in |the |Business |Continuity |Process |- |correct |answer |-1. |Identify |the |organizations |critical | processes
  9. |Identify |the |threats |to |those |processes
  10. |Analyze |the |effects |of |the |threats |on |those |processes
  11. |Create |a |business |continuity |strategy
  12. |Create |a |business |continuity |plan
  13. |Monitor |and |revise |the |business |continuity |process Guidelines |for |designing |effective |business |continuity |plan |- |correct |answer |-1. |Design |a |plan |that |is | clear |and |capable |of |being |easily |read |and |understood |during |a |crisis
  14. |Distribute |copies |of |the |plan |to |all |relevant |parties
  15. |Train |all |relevant |parties |in |crisis |procedures Most |business |continuity |plans |contain |- |correct |answer |-1. |The |strategy |to |follow |during |a |crisis
  16. |Information |about |individuals' |roles |and |duties |during |a |crisis
  17. |Steps |for |preventing |further |loss |and |/ |or |damage
  18. |An |emergency |response |plan |that |addresses |life |and |safety |issues
  19. |A |crisis |management |plan |for |addressing |communication |and |reputation |issues
  1. |Timing Methods |of |Jointly |Analyzing |the |Frequency |and |Severity |of |a |Loss |Exposure |- |correct |answer |-1. |The | Prouty |Approach
  2. |Total |Claims |Distribution Key |Elements |of |Risk |- |correct |answer |-1. |Uncertainty
  3. |Possibility Speculative |Risk |Include |- |correct |answer |-1. |Price |Risk
  4. |Credit |Risk
  5. |Inflation |Risk
  6. |Financial |Risk
  7. |Liquidity |Risk
  8. |Interest |Rate |Risk
  9. |Market |Risk Major |Ways |to |Classify |Risk |- |correct |answer |-1. |Pure |risk |versus |Speculative |Risk
  10. |Subjective |Risk |versus |Objective |Risk
  11. |Diversifiable |Risk |versus |Nondiversifiable |Risk Reasons |Subjective |Risk |Differs |From |Objective |Risk |- |correct |answer |-1. |Familiarity |
  12. |Control |
  13. |Frequency |and |severity Categories |of |Risk |Used |in |Enterprise |Risk |Management |- |correct |answer |-1. |Hazard |risk
  14. |Operational |Risk
  15. |Financial |Risk
  16. |Strategic |Risk

Financial |Consequences |of |Risk |- |correct |answer |-1. |Expected |cost |of |losses

  1. |Cost |of |risk |Management
  2. |Cost |of |residual |Uncertainty Significant |Differences |between |RM |and |Traditional |RM |- |correct |answer |-1. |Strategic |application
  3. |Risks |considered
  4. |Performance |measurement Types |of |Loss |Exposures |- |correct |answer |-1. |Property |Loss |Exposure
  5. |Liability |Loss |Exposure
  6. |Personal |Loss |Exposure
  7. |Personnel |Loss |Exposure
  8. |Net |Income |Loss |Exposure Major |Categories |of |Hazards |- |correct |answer |-1. |Moral |Hazard
  9. |Attitudinal |Hazard |/ |Morale |hazard
  10. |Physical |Hazard
  11. |Legal |Hazard. Pre |Loss |Risk |Management |Goals |- |correct |answer |-1. |Economy |of |operations
  12. |Tolerable |uncertainty
  13. |Legality
  14. |Social |responsibility Post |Loss |Risk |Management |Goals |- |correct |answer |-1. |Survival
  15. |Continuity |of |Operations
  16. |Profitability
  17. |Earnings |Stability