FPQP® - Module 4 Review Exam Questions with 100%
Satisfaction Guarantee Answers 2025/2026
Which of the following is NOT one of the rules of risk management?
A) Don't risk a lot for a little
B) Don't risk more than you can afford to lose
C) Consider the odds
D) The law of large numbers - correct answer D) The law of large numbers
Explanation:
The law of large numbers is a requirement for an insurable risk and is not a rule of risk
management. The other choices are all rules of risk management.
LO 4-1
Which of these would be an example of a peril?
A) A vicious dog
B) A swimming pool
C) A poorly lit stairwell
D) Theft of jewelry - correct answer D) Theft of jewelry
Explanation:
A peril is a specific cause of loss. Theft would therefore be a peril. The other choices are
hazards that could increase the probability of loss but are not perils themselves.
LO 4-2
Under a personal auto policy (PAP), which of the following is NOT one of the insured's
duties after an accident?
A) Providing emergency care to injured parties
B) Providing the insurer with authorization to examine medical records and any other
pertinent records
,C) Submitting any required proof of loss
D) Cooperating with any investigation - correct answer A) Providing emergency care to
injured parties
Explanation:
Providing emergency care to injured parties is not a requirement of a PAP. All other
actions, however, are duties of the insured.
LO 4-5
Which of the following statements about auto insurance is CORRECT?
I. Most states require liability insurance, but they do not require collision insurance.
II. The state-mandated liability limits for auto insurance are appropriate for most drivers.
- correct answer A) I only
Explanation:
States require liability insurance only; they do not require coverage for collisions. The
state-mandated limits are often quite low, such as $25,000 or $50,000. Coverage levels
should be higher to be sufficient.
LO 4-5
Which of these statements regarding agents and brokers is CORRECT?
A) Most brokers cannot bind coverage with an insurance company.
B) An agent represents the buyer.
C) Stock companies only use agents, and mutual companies only use brokers.
D) A broker is a legal representative of the insurance company. - correct answer A)
Most brokers cannot bind coverage with an insurance company.
Explanation:
Most stock and mutual companies use agents or brokers, or both. An agent is a legal
representative of the insurance company and can bind insurance with that company,
, while a broker represents the buyer and cannot usually bind coverage with an insurance
company.
LO 4-3
Which of these represents the best protection against financial loss due to premature
death?
A) Long-term care insurance
B) Medical insurance
C) Disability insurance
D) Life insurance - correct answer D) Life insurance
Explanation:
Life insurance can replace the financial loss suffered by others if the insured dies
prematurely.
LO 4-1
Which of the following statements is CORRECT?
A) Mutual companies are publicly traded on a stock exchange.
B) Nonparticipating policies are sold by stock companies only.
C) Stock companies are owned by the policyholders.
D) Mutual companies offer participating and nonparticipating policies. - correct answer
B) Nonparticipating policies are sold by stock companies only.
Explanation:
Nonparticipating policies can be sold by stock companies only; mutual companies
cannot sell nonparticipating policies.
LO 4-3
Which of the following would NOT be considered an insured as described in a personal
automobile policy?
Satisfaction Guarantee Answers 2025/2026
Which of the following is NOT one of the rules of risk management?
A) Don't risk a lot for a little
B) Don't risk more than you can afford to lose
C) Consider the odds
D) The law of large numbers - correct answer D) The law of large numbers
Explanation:
The law of large numbers is a requirement for an insurable risk and is not a rule of risk
management. The other choices are all rules of risk management.
LO 4-1
Which of these would be an example of a peril?
A) A vicious dog
B) A swimming pool
C) A poorly lit stairwell
D) Theft of jewelry - correct answer D) Theft of jewelry
Explanation:
A peril is a specific cause of loss. Theft would therefore be a peril. The other choices are
hazards that could increase the probability of loss but are not perils themselves.
LO 4-2
Under a personal auto policy (PAP), which of the following is NOT one of the insured's
duties after an accident?
A) Providing emergency care to injured parties
B) Providing the insurer with authorization to examine medical records and any other
pertinent records
,C) Submitting any required proof of loss
D) Cooperating with any investigation - correct answer A) Providing emergency care to
injured parties
Explanation:
Providing emergency care to injured parties is not a requirement of a PAP. All other
actions, however, are duties of the insured.
LO 4-5
Which of the following statements about auto insurance is CORRECT?
I. Most states require liability insurance, but they do not require collision insurance.
II. The state-mandated liability limits for auto insurance are appropriate for most drivers.
- correct answer A) I only
Explanation:
States require liability insurance only; they do not require coverage for collisions. The
state-mandated limits are often quite low, such as $25,000 or $50,000. Coverage levels
should be higher to be sufficient.
LO 4-5
Which of these statements regarding agents and brokers is CORRECT?
A) Most brokers cannot bind coverage with an insurance company.
B) An agent represents the buyer.
C) Stock companies only use agents, and mutual companies only use brokers.
D) A broker is a legal representative of the insurance company. - correct answer A)
Most brokers cannot bind coverage with an insurance company.
Explanation:
Most stock and mutual companies use agents or brokers, or both. An agent is a legal
representative of the insurance company and can bind insurance with that company,
, while a broker represents the buyer and cannot usually bind coverage with an insurance
company.
LO 4-3
Which of these represents the best protection against financial loss due to premature
death?
A) Long-term care insurance
B) Medical insurance
C) Disability insurance
D) Life insurance - correct answer D) Life insurance
Explanation:
Life insurance can replace the financial loss suffered by others if the insured dies
prematurely.
LO 4-1
Which of the following statements is CORRECT?
A) Mutual companies are publicly traded on a stock exchange.
B) Nonparticipating policies are sold by stock companies only.
C) Stock companies are owned by the policyholders.
D) Mutual companies offer participating and nonparticipating policies. - correct answer
B) Nonparticipating policies are sold by stock companies only.
Explanation:
Nonparticipating policies can be sold by stock companies only; mutual companies
cannot sell nonparticipating policies.
LO 4-3
Which of the following would NOT be considered an insured as described in a personal
automobile policy?
