CPCU 520 LATEST 2026 CORE EXAM SET QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔All states attempt to ensure that continuous auto insurance coverage is available to
consumers by - ✔✔Restricting the rights of insurers to cancel or nonrenew personal
auto insurance policies
✔✔Under the terms of her agency contracts, the insurers forward policies promptly to
Rhonda's customers and send a premium invoice with the policy. Insureds are
instructed to remit premium payments to their insurer. The insurers calculate Rhonda's
commissions and forward those commission payments to her monthly. Rhonda is
operating under which one of the following payment procedures? - ✔✔Direct bill basis
✔✔Omicron Manufacturing has approached Delta Insurance Brokerage to develop and
implement a voluntary insurance program for life, health, and disability insurance for
Omicron's employees. Delta puts together a program in which employees receive the
coverage at discounted rates, and premiums are deducted from the employees'
paychecks. Omicron and Delta are using which one of the following types of group
marketing to offer this program? - ✔✔Franchise marketing
✔✔The principal method of determining a prospect's insurance needs is through -
✔✔Completing a risk management review for the prospect.
✔✔An agency bill process in which the producer is usually not required to pay the
insurer until the premium is collected from the policyholder is known as - ✔✔The item
basis.
✔✔Which one of the following statements is true regarding traditional marketing
systems for insurance? - ✔✔A principal characteristic that distinguishes one traditional
marketing system from another is the ownership of policy expirations.
✔✔Which one of the following insurance consumer groups would have the most risk
financing alternatives available to them? - ✔✔National accounts
✔✔Martin Insurance Company targets international manufacturers of specialty
products. Its insureds place a high value on producer expertise, responsiveness, and
confidentiality. Martin wants to expand into similar markets. Which one of the following
insurance marketing distribution systems is most appropriate for Martin Insurance
Company? - ✔✔Direct writer
✔✔Tania, an underwriting trainee for Keithly Insurance Company, has received a new
homeowners application for Nanami. The home is to be insured for $150,000. It is a
frame house with a swimming pool and trampoline in the back yard. The grass needs
mowing and the shrubbery needs trimming. Nanami has a marginal credit score. What
, is Tania's first step in underwriting the policy for Nanami? - ✔✔Check to see if she has
the underwriting authority to make the decision.
✔✔Which one of the following is a major constraint of underwriting policy? -
✔✔Reinsurance
✔✔Once an underwriter has evaluated a submission, selected and applied any
appropriate modifications, and determined the premium, the next step is to implement
the underwriting decision. To implement the decision, the underwriter should first -
✔✔Communicate the decision to the producer.
✔✔A management control tool used to determine whether line underwriters are properly
implementing underwriting policy is known as an underwriting - ✔✔Audit
✔✔Which one of the following statements is correct with respect to estimating losses for
use in the ratemaking process? - ✔✔Rates are based on incomplete loss experience.
✔✔Which one of the following statements is true regarding the establishment of loss
reserves? - ✔✔Case reserves are established by the claim department while IBNR
reserves are established by actuaries.
✔✔The amount included in the insurance rate to protect insurers against the possibility
that actual claims or expenses will exceed projections is referred to as - ✔✔The loading
for profits and contingencies.
✔✔Which one of the following statements is correct with respect to increased limits
factors in liability insurance? - ✔✔Data used in developing insurance rates for basic
coverage limits include only losses associated with the basic coverage limit.
✔✔Which one of the following is a benefit of contingent surplus notes as an alternative
to traditional reinsurance? - ✔✔They increase a primary insurer's assets without
increasing its liabilities.
✔✔Which one of the following statements is correct with regard to the use of facultative
reinsurance? - ✔✔The treaty reinsurer is usually willing to allow the primary insurer to
remove high-hazard loss exposures from the treaty by using facultative reinsurance.
✔✔Pro rata reinsurance is the appropriate choice when which one of the following is the
main concern related to a primary insurer's rapid growth? - ✔✔Drain on policyholders'
surplus
✔✔Westfork Insurance has a surplus share treaty with Durham Reinsurance and
retains a line of $50,000. The treaty contains nine lines. Which one of the following
ANSWERS GUARANTEE A+
✔✔All states attempt to ensure that continuous auto insurance coverage is available to
consumers by - ✔✔Restricting the rights of insurers to cancel or nonrenew personal
auto insurance policies
✔✔Under the terms of her agency contracts, the insurers forward policies promptly to
Rhonda's customers and send a premium invoice with the policy. Insureds are
instructed to remit premium payments to their insurer. The insurers calculate Rhonda's
commissions and forward those commission payments to her monthly. Rhonda is
operating under which one of the following payment procedures? - ✔✔Direct bill basis
✔✔Omicron Manufacturing has approached Delta Insurance Brokerage to develop and
implement a voluntary insurance program for life, health, and disability insurance for
Omicron's employees. Delta puts together a program in which employees receive the
coverage at discounted rates, and premiums are deducted from the employees'
paychecks. Omicron and Delta are using which one of the following types of group
marketing to offer this program? - ✔✔Franchise marketing
✔✔The principal method of determining a prospect's insurance needs is through -
✔✔Completing a risk management review for the prospect.
✔✔An agency bill process in which the producer is usually not required to pay the
insurer until the premium is collected from the policyholder is known as - ✔✔The item
basis.
✔✔Which one of the following statements is true regarding traditional marketing
systems for insurance? - ✔✔A principal characteristic that distinguishes one traditional
marketing system from another is the ownership of policy expirations.
✔✔Which one of the following insurance consumer groups would have the most risk
financing alternatives available to them? - ✔✔National accounts
✔✔Martin Insurance Company targets international manufacturers of specialty
products. Its insureds place a high value on producer expertise, responsiveness, and
confidentiality. Martin wants to expand into similar markets. Which one of the following
insurance marketing distribution systems is most appropriate for Martin Insurance
Company? - ✔✔Direct writer
✔✔Tania, an underwriting trainee for Keithly Insurance Company, has received a new
homeowners application for Nanami. The home is to be insured for $150,000. It is a
frame house with a swimming pool and trampoline in the back yard. The grass needs
mowing and the shrubbery needs trimming. Nanami has a marginal credit score. What
, is Tania's first step in underwriting the policy for Nanami? - ✔✔Check to see if she has
the underwriting authority to make the decision.
✔✔Which one of the following is a major constraint of underwriting policy? -
✔✔Reinsurance
✔✔Once an underwriter has evaluated a submission, selected and applied any
appropriate modifications, and determined the premium, the next step is to implement
the underwriting decision. To implement the decision, the underwriter should first -
✔✔Communicate the decision to the producer.
✔✔A management control tool used to determine whether line underwriters are properly
implementing underwriting policy is known as an underwriting - ✔✔Audit
✔✔Which one of the following statements is correct with respect to estimating losses for
use in the ratemaking process? - ✔✔Rates are based on incomplete loss experience.
✔✔Which one of the following statements is true regarding the establishment of loss
reserves? - ✔✔Case reserves are established by the claim department while IBNR
reserves are established by actuaries.
✔✔The amount included in the insurance rate to protect insurers against the possibility
that actual claims or expenses will exceed projections is referred to as - ✔✔The loading
for profits and contingencies.
✔✔Which one of the following statements is correct with respect to increased limits
factors in liability insurance? - ✔✔Data used in developing insurance rates for basic
coverage limits include only losses associated with the basic coverage limit.
✔✔Which one of the following is a benefit of contingent surplus notes as an alternative
to traditional reinsurance? - ✔✔They increase a primary insurer's assets without
increasing its liabilities.
✔✔Which one of the following statements is correct with regard to the use of facultative
reinsurance? - ✔✔The treaty reinsurer is usually willing to allow the primary insurer to
remove high-hazard loss exposures from the treaty by using facultative reinsurance.
✔✔Pro rata reinsurance is the appropriate choice when which one of the following is the
main concern related to a primary insurer's rapid growth? - ✔✔Drain on policyholders'
surplus
✔✔Westfork Insurance has a surplus share treaty with Durham Reinsurance and
retains a line of $50,000. The treaty contains nine lines. Which one of the following
