CPCU 500 BDU final test questions with answers for 2024 students
1.When an insured reports a loss, the insurer must determine whether the loss triggers coverage. The primary method of post-loss recovery analysis is the DICE
method. The DICE method entails the following four steps: - Correct Answer Declarations, insuring agreement, conditions, and exclusions.
2.Adverse selection is most likely to be found relating to coverage for which of the following loss exposures? - Correct Answer Windstorm
3.Which of the following statements is correct regarding net income losses associated with property losses as compared to net income ass0ciated with liability losses? - Correct Answer Net income losses associated with property losses can be insured with policies offering reasonable premiums, while net income losses associated with liability losses are generally uninsurable.
4.Which one of the following statements is correct regarding the concept of risk? - Correct Answer The probability of an occurrence is measurable, and has a value between zero and one
5.Which one of the following statements is correct regarding risk management? - Correct Answer Organizations may find it difficult to establish a benchmark to assess the performance of their risk management program because it is difficult to assign a value to residual uncertainty.
6.Which one of the following statements is correct regarding risk control methods? - Correct Answer Diversification is typically applied to managing business risk, rather than hazard risk.
7.Which one of the following represents a way an organization can increase liquidity? - Correct Answer Not paying dividends
8.One of the advantages that risk transfer offers to an organization is: - Correct Answer reduces exposure to large losses. 9.Under the enterprise-wide risk management process, i there is a high likelihood that an organization's competitors will undercut price, the organization should consider the following two risk treatment strategies: - Correct Answer Avoid and
mitigate
10.Which one of the following statements is correct regarding the differences in risk categories between traditional risk management and enterprise-wide risk management? - Correct Answer Enterprise-wide risk management seeks to optimize risk-taking in relationship to strategic goals.
11.Which one of the following statements is correct regarding the concept of pooling? - Correct Answer Pooling arrangements do not change the severity or frequency of individual loss exposures.
12.The primary role of insurance is to: - Correct Answer Pay for covered losses.
13.Which one of the following is an example of a fortuitous loss? - Correct Answer An unknown thief steals a cell phone from the insured's car.
14.Which one of the following statement is correct regarding characteristics of insurable loss exposures? - Correct Answer Insurers cannot determine an appropriate premium unless the frequency or severity of a loss is measurable.
15.Moral hazards are one reason insurance policies should not: - Correct Answer Over indemnify
16.Which one of the following statements is correct regarding the concept of insurable interest? - Correct Answer The insurable interest requirement reduces
the moral hazard incentive that insurance may create for the insured.
17.The risk financing technique of transfer is most appropriate for loss exposure that
exhibit the following characteristics: - Correct Answer High severity and low frequency
18.Which one of the following statements is correct regarding the structure of insurance policies? - Correct Answer Endorsements take precedence over any conflicting basic term in the policy.
19.When assessing a loss, a risk management professional is determining the value
of damaged assets. The value of damaged assets can most likely be located on which of the following financial statements? - Correct Answer Balance sheet.
20.Which of the following statements is correct regarding the Pouty Approach to risk
management? - Correct Answer It helps risk management professionals prioritize loss exposures.
1.When an insured reports a loss, the insurer must determine whether the loss triggers coverage. The primary method of post-loss recovery analysis is the DICE
method. The DICE method entails the following four steps: - Correct Answer Declarations, insuring agreement, conditions, and exclusions.
2.Adverse selection is most likely to be found relating to coverage for which of the following loss exposures? - Correct Answer Windstorm
3.Which of the following statements is correct regarding net income losses associated with property losses as compared to net income ass0ciated with liability losses? - Correct Answer Net income losses associated with property losses can be insured with policies offering reasonable premiums, while net income losses associated with liability losses are generally uninsurable.
4.Which one of the following statements is correct regarding the concept of risk? - Correct Answer The probability of an occurrence is measurable, and has a value between zero and one
5.Which one of the following statements is correct regarding risk management? - Correct Answer Organizations may find it difficult to establish a benchmark to assess the performance of their risk management program because it is difficult to assign a value to residual uncertainty.
6.Which one of the following statements is correct regarding risk control methods? - Correct Answer Diversification is typically applied to managing business risk, rather than hazard risk.
7.Which one of the following represents a way an organization can increase liquidity? - Correct Answer Not paying dividends
8.One of the advantages that risk transfer offers to an organization is: - Correct Answer reduces exposure to large losses. 9.Under the enterprise-wide risk management process, i there is a high likelihood that an organization's competitors will undercut price, the organization should consider the following two risk treatment strategies: - Correct Answer Avoid and
mitigate
10.Which one of the following statements is correct regarding the differences in risk categories between traditional risk management and enterprise-wide risk management? - Correct Answer Enterprise-wide risk management seeks to optimize risk-taking in relationship to strategic goals.
11.Which one of the following statements is correct regarding the concept of pooling? - Correct Answer Pooling arrangements do not change the severity or frequency of individual loss exposures.
12.The primary role of insurance is to: - Correct Answer Pay for covered losses.
13.Which one of the following is an example of a fortuitous loss? - Correct Answer An unknown thief steals a cell phone from the insured's car.
14.Which one of the following statement is correct regarding characteristics of insurable loss exposures? - Correct Answer Insurers cannot determine an appropriate premium unless the frequency or severity of a loss is measurable.
15.Moral hazards are one reason insurance policies should not: - Correct Answer Over indemnify
16.Which one of the following statements is correct regarding the concept of insurable interest? - Correct Answer The insurable interest requirement reduces
the moral hazard incentive that insurance may create for the insured.
17.The risk financing technique of transfer is most appropriate for loss exposure that
exhibit the following characteristics: - Correct Answer High severity and low frequency
18.Which one of the following statements is correct regarding the structure of insurance policies? - Correct Answer Endorsements take precedence over any conflicting basic term in the policy.
19.When assessing a loss, a risk management professional is determining the value
of damaged assets. The value of damaged assets can most likely be located on which of the following financial statements? - Correct Answer Balance sheet.
20.Which of the following statements is correct regarding the Pouty Approach to risk
management? - Correct Answer It helps risk management professionals prioritize loss exposures.
