FPQP® Competency Test Preparation Questions with
Approved Financial Planning Answers 2025/2026
For an annuity, under which one of the following scenarios would a 10% penalty tax
apply? - correct answer Kelly, age 38, takes a lump sum distribution
Which one of the following statements regarding education credits is CORRECT? -
correct answer The Lifetime Learning Credit includes expenses to acquire or improve
job skills.
Which one of the following applies to defined benefit plans? - correct answer They
provide a predetermined, fixed retirement benefit for participating employees.
A small-business owner who is paid $200,000 each year by his company wants to
establish a retirement plan. He has part-time employees but only wants to include full-
time employees in the plan. The profits and cash flow of the business fluctuate from
year to year, and the owner wants to have the flexibility of having up to 20% of his
compensation contributed to a retirement plan for his benefit each year. Which one of
the following plans satisfies these conditions? - correct answer Profit sharing
Which one of the following is not a requirement to receive retirement benefits from
Social Security? - correct answer You must be currently insured.
Which one of the following statements regarding Social Security is CORRECT? -
correct answer At full retirement age (FRA), workers can receive their primary
insurance amount (PIA).
Caitlin makes $60,000 per year and is contributing 4% of her salary to her 401(k) plan.
Her company provides a 50% match on up to 10% of compensation. How much is the
company match for Caitlin's contribution? - correct answer 1,200
A primary type of personal risk is loss of income. Which of the following are common
potential causes for a loss of income? - correct answer Disability
, Death
Divorce
For several years, Wild Warriors, Inc. has sponsored an obstacle course challenge. In
previous years, Wild Warriors purchased a specialized liability policy to cover
associated losses; however, the cost of the policy has increased considerably each
year. Because of this, Wild Warrior officials decided to discontinue the event this year.
What risk management technique is the company using? - correct answer Risk
avoidance
The rules of risk management include which of the following? - correct answer Don't
risk a lot for a little
Don't risk more than you can afford to lose
Consider the odds
Which of the following accurately identify the key differences between an insurance
broker and an insurance agent? - correct answer An agent can bind an insurer; a
broker cannot bind an insurer.
An agent represents the insurer; a broker represents the insured.
Insurance agents represent the insurer and can bind coverage (i.e., bind the insurer).
Insurance brokers represent the insured and cannot bind coverage.
Larry purchased a building 10 years ago and insured it for $500,000 with a $2,000
deductible. The building's current replacement cost is $1.2 million, but Larry has not
increased the insurance. A recent hailstorm caused $400,000 in damage. If the
insurance policy has an 80% coinsurance provision, how much of Larry's claim will the
policy pay? (Round your answer to the nearest dollar.) - correct answer Based on the
coinsurance requirement, the building should be insured for $960,000 (80% of
$1,200,000).
As a result of being underinsured, Larry's claim will be paid based on the following
formula:
Approved Financial Planning Answers 2025/2026
For an annuity, under which one of the following scenarios would a 10% penalty tax
apply? - correct answer Kelly, age 38, takes a lump sum distribution
Which one of the following statements regarding education credits is CORRECT? -
correct answer The Lifetime Learning Credit includes expenses to acquire or improve
job skills.
Which one of the following applies to defined benefit plans? - correct answer They
provide a predetermined, fixed retirement benefit for participating employees.
A small-business owner who is paid $200,000 each year by his company wants to
establish a retirement plan. He has part-time employees but only wants to include full-
time employees in the plan. The profits and cash flow of the business fluctuate from
year to year, and the owner wants to have the flexibility of having up to 20% of his
compensation contributed to a retirement plan for his benefit each year. Which one of
the following plans satisfies these conditions? - correct answer Profit sharing
Which one of the following is not a requirement to receive retirement benefits from
Social Security? - correct answer You must be currently insured.
Which one of the following statements regarding Social Security is CORRECT? -
correct answer At full retirement age (FRA), workers can receive their primary
insurance amount (PIA).
Caitlin makes $60,000 per year and is contributing 4% of her salary to her 401(k) plan.
Her company provides a 50% match on up to 10% of compensation. How much is the
company match for Caitlin's contribution? - correct answer 1,200
A primary type of personal risk is loss of income. Which of the following are common
potential causes for a loss of income? - correct answer Disability
, Death
Divorce
For several years, Wild Warriors, Inc. has sponsored an obstacle course challenge. In
previous years, Wild Warriors purchased a specialized liability policy to cover
associated losses; however, the cost of the policy has increased considerably each
year. Because of this, Wild Warrior officials decided to discontinue the event this year.
What risk management technique is the company using? - correct answer Risk
avoidance
The rules of risk management include which of the following? - correct answer Don't
risk a lot for a little
Don't risk more than you can afford to lose
Consider the odds
Which of the following accurately identify the key differences between an insurance
broker and an insurance agent? - correct answer An agent can bind an insurer; a
broker cannot bind an insurer.
An agent represents the insurer; a broker represents the insured.
Insurance agents represent the insurer and can bind coverage (i.e., bind the insurer).
Insurance brokers represent the insured and cannot bind coverage.
Larry purchased a building 10 years ago and insured it for $500,000 with a $2,000
deductible. The building's current replacement cost is $1.2 million, but Larry has not
increased the insurance. A recent hailstorm caused $400,000 in damage. If the
insurance policy has an 80% coinsurance provision, how much of Larry's claim will the
policy pay? (Round your answer to the nearest dollar.) - correct answer Based on the
coinsurance requirement, the building should be insured for $960,000 (80% of
$1,200,000).
As a result of being underinsured, Larry's claim will be paid based on the following
formula:
