CPCU 553 - Objectives and Knowledge Checks - Survey of
Personal Insurance & Financial Planning.
Summarize the three elements of loss exposures - ANS Every loss exposure has
three elements:
Asset exposed to loss
Cause of loss
Financial consequence of loss
Examples of Assets (Real Property) Exposed to Loss - ANS Land, buildings, other
structures attached to the land (swimming pool, storage shed, flagpole), whatever is
growing on the land (tress, crops), and anything embedded in the land (foundations,
underground pipes)
Examples of Assets (Personal Property) Exposed to Loss - ANS Dwelling contents,
high-value articles (jewelry, silverware), rare or unique property (antiques, art work),
business personal property, motor vehicles, trailers, watercraft, and aircraft
An individual may face a claim for tort damages on the basis of any act of the
following, EXCEPT:
Negligence
Intentional tort
Absolute liability
Contractual liability - ANS Contractual liability
Legal liability imposed by a specific statute or law is:
Absolute liability
Contractual liability
Statutory liability
Tort liability - ANS Statutory liability
Personal financial planning loss exposures include all of the following, EXCEPT:
Retirement loss exposures
Marital and family loss exposures
Premature death loss exposures
Health and disability loss exposures - ANS Marital and family loss exposures
The steps in the risk management process include all of the following, EXCEPT:
Analyzing loss exposures
Monitoring the financial condition of suppliers
Implementing the selected risk management techniques
Monitoring the results and revising the risk management program - ANS Monitoring
the financial condition of suppliers
The risk management process consists of six steps: - ANS identifying loss exposures
Analyzing loss exposures
Examining the feasibility of risk management techniques
Selecting the appropriate risk management techniques
,Implementing the selected risk management techniques
Monitoring results and revising the risk management program
Glossary
Insuring agreements:
Contain unique information about the insured
Contain a promise to make payment
Include only one agreement for a package policy
Limit or expand coverage based on definition of terms - ANS Contain a promise to
make payment
Exclusions are useful for each of the following purposes, EXCEPT:
Adding coverage’s requiring special treatment
Reducing likelihood of coverage duplications
Eliminating coverage for uninsurable loss exposures
Assisting in managing moral and morale hazards - ANS Adding coverage’s requiring
special treatment
Which of the following insurance policy provisions limits and clarifies coverage?
Declarations
Insuring agreements
Conditions
Exclusions - ANS Exclusions
Every insurance policy is composed of numerous policy provisions. Each provision
falls into one of six categories, depending on the purpose it serves: - ANS
Declarations
Definitions
Insuring agreements
Conditions
Exclusions
Miscellaneous provisions
Glossary
Steps of the DICE method include all of the major policy provisions, EXCEPT:
Declarations
Insuring agreements
Conditions
Expenses - ANS Expenses
Which one of the following describes the operation of no play, no pay laws?
Compensates an insured for bodily injury caused by an uninsured motorist
Provides minimal liability coverage at a reduced cost
Prohibits uninsured drivers from initiating lawsuits for noneconomic damages
Requires motorists to provide proof of financial responsibility - ANS Prohibits
uninsured drivers from initiating lawsuits for noneconomic damages
The major advantage of the tort liability system is that it... - ANS ...provides a remedy
for victims of negligent or irresponsible drivers who cause accidents. Injured victims
are compensated for their costs, and the costs are allocated to the responsible party.
, The disadvantages of the tort liability system include these considerations: - ANS
Substantial time delays in reaching a settlement either through negotiation or
through the courts
Significant legal and administrative costs related to settling lawsuits or pursuing a
case to judgment
Punitive damage awards by juries that may be considered excessive
Financial responsibility laws require motorists to provide proof of financial
responsibility (such as liability insurance) under these circumstances: - ANS After an
auto accident involving bodily injury or property damage exceeding a certain dollar
amount
After a conviction for certain serious offenses, such as drunk driving or reckless
driving, or after losing a driver's license because of repeated violations
Upon failure to pay a final judgment that results from an auto accident
Some potential disadvantages of financial responsibility laws include these
considerations: - ANS Most financial responsibility requirements become effective
only after an accident, a conviction, or a judgment.
Financial responsibility laws do not guarantee payment to all accident victims.
Persons injured by uninsured drivers, hit-and-run drivers, or drivers of stolen cars
might not be compensated.
Injured persons might not be fully indemnified for their injuries even when injured by
motorists who can prove financial responsibility. Most financial responsibility laws set
minimum financial requirements, which may not fully compensate a victim.
Most states have enacted compulsory auto insurance laws that require auto liability
insurance for all motorists to drive legally within the state. - ANS
One advantage of compulsory insurance laws, as compared to financial
responsibility laws, is that... - ANS ...motorists must provide proof of financial
responsibility before an accident occurs. By requiring proof of financial responsibility
prior to an accident, compulsory insurance laws go beyond financial responsibility
laws by ensuring that accident victims are compensated for their losses.
These are frequently cited disadvantages of compulsory insurance: - ANS
Compulsory insurance laws do not guarantee compensation to all accident victims.
Accidents and resulting injuries can be caused by drivers who do not comply with the
law, such as hit-and-run drivers, drivers whose insurance has lapsed, out-of-state
drivers with no insurance, drivers of stolen cars, or drivers of fraudulently registered
vehicles.
Compulsory insurance laws provide incomplete protection. The required minimum
amount of insurance may not meet the full needs of accident victims. In some states,
the required minimum limit for bodily injury coverage is as low as $10,000 or $20,000
per person.
Compulsory insurance laws may not reduce the number of uninsured motorists.
Some drivers do not insure their vehicles because insurance is too costly. Others let
coverage lapse after demonstrating proof of insurance to satisfy vehicle registration
requirements.
