CFP 512 CERTIFICATION EXAM
QUESTIONS AND DETAILED CORRECT
ANSWERS (VERIFIED ANSWERS) WITH
RATIONALES| 2024-2025
William had an interior water pipe break, and water poured
into his basement. Which of the following statements
accurately reflect what may occur or be required of William
subsequent to this break?
i.William should turn off the water and attempt to prevent
any further damage immediately upon discovering the
leak.
ii. The insurance company likely will ask for an inventory of
damaged items, and William is obligated to provide it if he
wants the claim paid.
iii. William can throw away any damaged property, relying
on the insurance company to accept his inventory list as
accurate.
iv. The insurer may choose to repair or replace damaged
property with that of like kind and quality, rather than pay
William for the loss.
A)
I and II
B)
II and IV
C)
I and III
,D) I, II, and IV Correct Answer D)
I, II, and IV
The answer is I, II, and IV. After the leak is under
control, he should call his agent or his insurer's
claims office to notify the insurance company of the
loss. The insurance company has the right to ask for
evidence of the loss. The insurer retains the right to
determine what evidence is required, and the insured
is obligated to provide whatever is available or run the
risk of voiding the policy.
Which of the following are primary criteria that should be
considered when selecting an insurer?
A favorable rating from several rating companies
The number of agents employed
High persistency rate
The fact it is not on the National Association of Insurance
Commissioners' (NAIC) Watchlist
A)
I and II
B) I, III, and IV
C)
I, II, III, and IV
D)
III and IV Correct Answer B)
I, III, and IV
,The answer is I, III, and IV. The number of agents
employed is not relevant. An insurer should have a
favorable rating from several rating companies, have a
high persistency rate (low lapse rate), and not be on
the NAIC's Watchlist.
Agents operating under the American agency system who
represent several insurance companies and decide on a
case-by-case basis where they will place business are
also known as which type of insurance producer?
A)
Captive agents
B)
Career agents
C) Independent agents
D)
Brokers Correct Answer C)
Independent agents
Which of the following perils are covered by an HO15
endorsement to form HO3 for personal property?
Wind damage when property is away from the premises
Fire damage when property is on the premises
Groundwater damage when property is on the premises
Earth movement when property is away from the premises
A)
II and III
B)
, II, III, and IV
C)
I and IV
D) I, II, and IV Correct Answer D)
I, II, and IV
All risks are covered, but groundwater damage is only
covered while personal property is away from the
premises. HO15 modifies the earth movement
exclusion so that it only applies to coverages for the
dwelling and other structures.
Chuck purchased Chuck's Garage, Bar & Grill five years
ago for $120,000. After extensive repairs, the building's
current replacement value is $240,000. Chuck originally
insured the building for its original replacement cost of
$120,000 and has not increased the coverage. His policy
has an 80% coinsurance clause and a $1,000 deductible.
Last week a fire in the kitchen caused $60,000 of damage.
How much will the insurance company pay Chuck for his
loss?
A) $36,500
B)
$29,000
C)
$60,000
D)
$59,000 Correct Answer A)
$36,500
