FP512 PRACTICE EXAM QUESTIONS AND ANSWERS
WITH COMPLETE SOLUTIONS VERIFIED GRADED A++
Which of the following refers to the process of evaluating and classifying the risk
level of applicants for insurance?
A)
Utilization review
B)
Underwriting
C)
Actuarial science
D)
Adverse selection
Underwriting is the process of evaluating and classifying the risk level of applicants for
insurance. Underwriting may also help insurers control adverse selection.
Choose the method of risk management that is implemented by a homeowner
who installs storm shutters.
A)
Retention
B)
Reduction
C)
,Transfer
D)
Avoidance
The answer is reduction. Installing storm shutters reduces the risk of damage to the
homeowner's property.
You have a meeting with Oscar, age 26, and his wife Judith, age 25, this afternoon
to review their risk management plan. They have two children, two cars, a home,
and a boat. Oscar works at the local bank, and Judith works at an engineering
firm. Identify the CORRECT statement(s) regarding their risk management plan.
They have a limited amount of liability exposure.
They have a higher probability of becoming disabled versus experiencing
premature death.
Having collision insurance on their cars is more important than liability coverage.
Long-term care insurance should not be a current priority within their risk
management plan.
A)
IV only
B)
II and IV
C)
II, III, and IV
D)
I, II, and III
,B
Oscar and Judith have unlimited liability exposure. A car accident could lead to an
unlimited amount of liability depending on the circumstances, as well as the possibility
of negligence occurring on their property. There is a higher probability of becoming
disabled than of experiencing premature death at their ages, and it is much more
important to have liability insurance on a vehicle than collision coverage. Liability claims
may be much higher than any type of collision damage to a vehicle. Both Oscar and
Judith are too young to consider long-term care insurance at this time.
Preston called Joanna, an insurance broker, to obtain coverage on his 30-foot
sailboat. Joanna told him to send in a binder premium of $75. She told him that by
doing so, he would be covered and that he should go ahead and enjoy the boat.
Joanna submitted an application for insurance to Boater's Insurance Corp. for
issuance of the policy. Boater's declined the coverage. The day Joanna learned
this, Preston called and told her a sudden wind caused him to lose control of his
boat. He then smashed into another sailboat, causing substantial damage to both
boats.
Who will be responsible for the damages?
A)
Boater's Insurance Corp. will have to pay the damages since it did not notify
Preston that he was not covered.
B)
Boater's will have to pay since Joanna collected a premium from Preston.
, C)
Preston will have to pay because no insurance policy is in force until the
insurance company accepts the risk.
D)
Joanna is responsible because, as a broker, she personally bound coverage for
Preston but was unable to place the coverage before the accident.
D
Joanna will have to pay because, as a broker, she personally bound coverage for
Preston but was unable to place the coverage before the accident. Boater's Insurance
Corp. was never a party to an insurance contract with Preston. Since Joanna is a
broker, her actions only speak for herself. There is no insurance coverage in force.
Preston will need to make a claim against Joanna, which will likely be reviewed by her
Errors and Omissions carrier. If Preston sues and wins, Joanna also could be held
personally liable.
Which of the following are duties of the courts in regulating insurers?
To render decisions on the meaning of policy terms
To enact laws that govern the conduct of insurers
To rule on the constitutionality of insurance laws
To determine requirements an insurer must meet to obtain a license
A)
I and IV
B)
WITH COMPLETE SOLUTIONS VERIFIED GRADED A++
Which of the following refers to the process of evaluating and classifying the risk
level of applicants for insurance?
A)
Utilization review
B)
Underwriting
C)
Actuarial science
D)
Adverse selection
Underwriting is the process of evaluating and classifying the risk level of applicants for
insurance. Underwriting may also help insurers control adverse selection.
Choose the method of risk management that is implemented by a homeowner
who installs storm shutters.
A)
Retention
B)
Reduction
C)
,Transfer
D)
Avoidance
The answer is reduction. Installing storm shutters reduces the risk of damage to the
homeowner's property.
You have a meeting with Oscar, age 26, and his wife Judith, age 25, this afternoon
to review their risk management plan. They have two children, two cars, a home,
and a boat. Oscar works at the local bank, and Judith works at an engineering
firm. Identify the CORRECT statement(s) regarding their risk management plan.
They have a limited amount of liability exposure.
They have a higher probability of becoming disabled versus experiencing
premature death.
Having collision insurance on their cars is more important than liability coverage.
Long-term care insurance should not be a current priority within their risk
management plan.
A)
IV only
B)
II and IV
C)
II, III, and IV
D)
I, II, and III
,B
Oscar and Judith have unlimited liability exposure. A car accident could lead to an
unlimited amount of liability depending on the circumstances, as well as the possibility
of negligence occurring on their property. There is a higher probability of becoming
disabled than of experiencing premature death at their ages, and it is much more
important to have liability insurance on a vehicle than collision coverage. Liability claims
may be much higher than any type of collision damage to a vehicle. Both Oscar and
Judith are too young to consider long-term care insurance at this time.
Preston called Joanna, an insurance broker, to obtain coverage on his 30-foot
sailboat. Joanna told him to send in a binder premium of $75. She told him that by
doing so, he would be covered and that he should go ahead and enjoy the boat.
Joanna submitted an application for insurance to Boater's Insurance Corp. for
issuance of the policy. Boater's declined the coverage. The day Joanna learned
this, Preston called and told her a sudden wind caused him to lose control of his
boat. He then smashed into another sailboat, causing substantial damage to both
boats.
Who will be responsible for the damages?
A)
Boater's Insurance Corp. will have to pay the damages since it did not notify
Preston that he was not covered.
B)
Boater's will have to pay since Joanna collected a premium from Preston.
, C)
Preston will have to pay because no insurance policy is in force until the
insurance company accepts the risk.
D)
Joanna is responsible because, as a broker, she personally bound coverage for
Preston but was unable to place the coverage before the accident.
D
Joanna will have to pay because, as a broker, she personally bound coverage for
Preston but was unable to place the coverage before the accident. Boater's Insurance
Corp. was never a party to an insurance contract with Preston. Since Joanna is a
broker, her actions only speak for herself. There is no insurance coverage in force.
Preston will need to make a claim against Joanna, which will likely be reviewed by her
Errors and Omissions carrier. If Preston sues and wins, Joanna also could be held
personally liable.
Which of the following are duties of the courts in regulating insurers?
To render decisions on the meaning of policy terms
To enact laws that govern the conduct of insurers
To rule on the constitutionality of insurance laws
To determine requirements an insurer must meet to obtain a license
A)
I and IV
B)
