CRU Risk Assessment & Mitigation 3

Question 1

An underwriter reviews a home with a wood-burning fireplace and no documentation of chimney maintenance. This is best classified as which type of hazard?

Accepted Answer

Physical hazard

Answer

An unmaintained chimney is a physical hazard—a tangible condition of the property that increases the probability of loss through fire or carbon monoxide exposure.

Question 2

Under the concept of 'adverse selection,' an insurer that offers rates below market average should expect:

Accepted Answer

A disproportionate influx of higher-risk applicants seeking the low price

Answer

Adverse selection occurs when below-market pricing attracts a higher concentration of bad risks, as better-risk applicants find adequate coverage elsewhere at similar prices.

Question 3

A property in a coastal area has a hip roof rather than a gable roof. From a wind risk perspective, this is:

Accepted Answer

A positive factor because hip roofs have superior wind resistance

Answer

Hip roofs have four sloping sides that deflect wind more aerodynamically than gable roofs, making them significantly more resistant to high-wind events.

Question 4

A homeowner has a trampoline on the property but has erected a six-foot fence around it with a locked gate. The underwriter should:

Accepted Answer

Consider the fencing as a partial mitigation but still note the elevated liability

Answer

While fencing reduces access, trampolines remain a significant liability exposure; underwriters should acknowledge the mitigation while still noting the residual risk.

Question 5

Which of the following is an example of risk transfer in residential property risk management?

Accepted Answer

Purchasing a homeowners insurance policy

Answer

Purchasing insurance is the classic example of risk transfer, shifting the financial consequences of a potential loss from the homeowner to the insurer.

(CRU) Certified Residential Underwriter Practice Test

(CRU) Certified Residential Underwriter Practice Test

CRU Risk Assessment & Mitigation 3