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CFP Insurance Exam Questions with Verified Solutions, Exams of Advanced Education

American Public University System (APUS)Advanced Education

CFP Insurance Exam Questions with Verified Solutions

Typology: Exams

2024/2025

Available from 07/15/2025

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CFP Insurance Exam Questions with
Verified Solutions
perils - ANSWER-the actual cause of a loss (fire, wind, burglary)
hazard - ANSWER-a condition that increases the likelihood of a loss occurring (moral,
morale, physical hazard)
moral hazard - ANSWER-character flaw such as dishonesty
morale - ANSWER-indifference created because the person is insured
physical hazard - ANSWER-condition that increases the likelihood of a peril due to the
nature of the physical environment
elements of a valid contract - ANSWER-mutual consent, offer and acceptance,
performance or delivery, lawful purpose, legal competency of all parties
principle of indemnity - ANSWER-the insured is only entitled to compensation to the
extent of the insured's financial loss
property and liability insurance insurable interest - ANSWER-insured must have an
insurable interest at the time of policy inception and at the time of loss
life insurance insurable interest - ANSWER-only needs insurable interest at the time of
policy inception
underwriting - ANSWER-underwriting is the process of classifying applicants into risk
pools, selecting insureds and assigning a premium
agents - ANSWER-legal representatives of an insurer and act on behalf of an insurer
brokers - ANSWER-legal representatives of an insured and act in the best interest of
the insured
deductibles - ANSWER-amount insured pays before benefits start
copayments - ANSWER-in addition or substitutes to deductibles, common with health
insurance
coinsurance - ANSWER-cost sharing between insured and insurer
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CFP Insurance Exam Questions with

Verified Solutions

perils - ANSWER-the actual cause of a loss (fire, wind, burglary) hazard - ANSWER-a condition that increases the likelihood of a loss occurring (moral, morale, physical hazard) moral hazard - ANSWER-character flaw such as dishonesty morale - ANSWER-indifference created because the person is insured physical hazard - ANSWER-condition that increases the likelihood of a peril due to the nature of the physical environment elements of a valid contract - ANSWER-mutual consent, offer and acceptance, performance or delivery, lawful purpose, legal competency of all parties principle of indemnity - ANSWER-the insured is only entitled to compensation to the extent of the insured's financial loss property and liability insurance insurable interest - ANSWER-insured must have an insurable interest at the time of policy inception and at the time of loss life insurance insurable interest - ANSWER-only needs insurable interest at the time of policy inception underwriting - ANSWER-underwriting is the process of classifying applicants into risk pools, selecting insureds and assigning a premium agents - ANSWER-legal representatives of an insurer and act on behalf of an insurer brokers - ANSWER-legal representatives of an insured and act in the best interest of the insured deductibles - ANSWER-amount insured pays before benefits start copayments - ANSWER-in addition or substitutes to deductibles, common with health insurance coinsurance - ANSWER-cost sharing between insured and insurer

property coinsurance - ANSWER-amount insurer pays = (amount of insurance carried / amount of insurance required) * covered loss - deductible replacement cost - ANSWER-current cost of replacing property with new materials of like kind actual cash value - ANSWER-replacement cost less depreciation agreed upon value - ANSWER-determined jointly by insured and insurer legislative branch - ANSWER-provides for licensing agents judicial branch - ANSWER-rules on constitutionality of laws passed by legislative branch executive or state insurance commissioner - ANSWER-administers, interprets and enforces insurance laws health insurance coinsurance - ANSWER-typically $500 deductible and insured is responsible for 20% of expenses above the deductible Affordable Care Act max out-of-pocket - ANSWER-individual: $8, family: $17, parties to a life insurance contract - ANSWER-insured, owner of policy, beneficiary the human life value approach - ANSWER-income less insured's expenditures the needs approach - ANSWER-estimate the cash needs that the family will require at and after the death of the insured the capitalized-earnings approach - ANSWER-like the human life value but no need to determine the work life expectancy because, if the investment returns are realized, the lump sum death benefit will yield enough earnings each year to provide the desired income for a perpetual period of time Which of the following is correct regarding a peril and hazard? - ANSWER-a peril is the proximate or actual cause of a loss Jennifer is applying for life insurance, with her two children as the beneficiary. Jennifer has always been told she looks young for her age and although she is 58, she stated that she is 28 on her life insurance application. What would the insurer be most likely to do if Jennifer's beneficiaries attempt to collect on the life insurance policy? - ANSWER- Recalculate the face value of the policy based on actual premiums paid Which of the following statements regarding loss severity is true?

authority does Joe believe his agent has to enter into an insurance contract? - ANSWER-Implied Authority A subrogation clause means that: - ANSWER-Insured cannot indemnify himself from both the insurance company and a negligent third party for the same claim. The Watson family has a family medical policy that provides the following coverage:

  • $250/person deductible (3 person maximum).
  • $1,000 out-of-pocket limit.
  • 80/20 coinsurance provision. On a family trip, the Watsons were involved in a car accident. Four family members were hurt. Each person incurred medical expenses of $7,500. How much will the insurance company pay? - ANSWER-$29, Black Smith is an employee of ABC Corporation. He has just divorced Phyllis who was on all of his group health plan coverages. Phyllis wants to know to what COBRA coverage she is entitled. The following is a list of Black's group health plan benefits, all of which are integral parts of the plan. Which of Black's benefits is/are subject to COBRA rules?
  1. Medical expense plan.
  2. Dental plan.
  3. Vision care plan.
  4. Prescription care plan. - ANSWER-1, 2, 3, and 4 Due to a recession, Pat has voluntarily changed her status from full-time to part-time with her employer. Prior to the change, she and her husband were covered under the company health plan. Which statement regarding COBRA is correct? - ANSWER- COBRA rules allow continuation of health coverage in this situation for up to 18 months. Medical insurance is commonly known as health insurance and can be purchased from private insurance companies. Which of the following best describes the classes of medical insurance? - ANSWER-Coverage for hospital expense, surgical expense, physician expense, and major medical expense. Mr. Johns has a major medical insurance policy with a $1,000 deductible and an 80% coinsurance clause. He becomes ill and is admitted to the hospital for several days. When he is discharged, his hospital bill is $5,000, and his doctor bills are $2,500. What is the amount that his insurance co-pay will pay? - ANSWER-$5, (loss - deductible) = x x - (20%*x) = insurance benefit In which of the following events would COBRA rules apply for the benefit of the covered employee, employee's spouse, or dependent child?
  5. The death of the covered employee.
  6. The covered employee is fired for incompetence.
  1. The employee changes status from full-time to part-time and, as a result, loses coverage.
  2. The covered employee gets a divorce. - ANSWER-1, 2, 3, and 4 Which of the following is a characteristic of guaranteed renewability?
  3. The insurer guarantees to renew the policy to a stated age.
  4. The policy is noncancelable and the premium may not be increased.
  5. Renewal is solely at insurer's discretion.
  6. The insurer has the right to increase the premium rates for the underlying class in which the insured is placed. Note: not for a single individual. - ANSWER-1 and 4 COBRA coverage is available for which of the following persons?
  7. A retiring employee.
  8. An employee who is terminated.
  9. Spouses and dependents of a deceased employee.
  10. An employee no longer able to work due to disability. - ANSWER-1, 2, 3, and 4 Noncancelable health insurance contracts are different from guaranteed renewable contracts because: - ANSWER-Noncancelable policies cannot have a premium change Olivia, age 52, purchased a life insurance policy on her own life. All the necessary legal elements of a contract including, (1) offer and acceptance, (2) consideration, (3) competent parties, and (4) legal purpose were met. However, Olivia lied that her age was 42 on the insurance application, and is receiving a premium commensurate with that age. Olivia died two years later in an automobile accident. Her certified death certificate indicated that she was 54 at the time of her death, and that she was 52 when she purchased the policy. Which of the following statement(s) is/are correct regarding this scenario? - ANSWER-Her beneficiary will receive a reduced death benefit to reflect her actual age Which one of the following statements concerning universal life insurance is false? - ANSWER-The death benefit of a universal life insurance policy is fixed Joe, age 33, is married and has a newborn son. Joe is concerned about providing for his family in the event of his premature death. He is concerned about the long-term affordability of life insurance but is able to budget a fixed amount for a period of time. Which of the following policies would you recommend? - ANSWER-Level-premium term Which of the following statement(s) is/are correct regarding buy-sell arrangements? Entity purchase arrangements increase the income tax basis for some survivors upon the death of another owner Cross-purchase arrangements increase the income tax basis for all survivors upon the death of another owner. - ANSWER-2 only The blackout period is: - ANSWER-The period of time when the dependents have reached age 18 and the spouse's Social Security retirement benefits have not started.