FREE CFSP Risk Management & Insurance Questions and Answers

Question 1

What is the primary purpose of risk management in financial planning?

Accepted Answer

To identify, assess, and mitigate potential financial losses

Answer

To eliminate all financial risks

Answer

To maximize investment returns regardless of risk

Answer

To transfer all risks to insurance companies

Question 2

Which type of risk is typically uninsurable?

Accepted Answer

Speculative risk

Answer

Pure risk

Answer

Property risk

Answer

Liability risk

Question 3

What is the principle of indemnity in insurance?

Accepted Answer

Restoring the insured to their pre-loss financial position

Answer

The right to purchase additional coverage

Answer

Guaranteeing replacement cost regardless of value

Answer

Paying claims based on future earnings potential

Question 4

Which insurance rider would provide coverage for a serious illness?

Accepted Answer

Critical illness rider

Answer

Waiver of premium rider

Answer

Accidental death benefit rider

Answer

Long-term care rider

Question 5

What is the purpose of a deductible in an insurance policy?

Accepted Answer

To share risk between insurer and policyholder

Answer

To increase the insurer's profit margin

Answer

To eliminate all out-of-pocket expenses

Answer

To delay claim payments

Question 6

Which risk management technique involves accepting potential losses?

Accepted Answer

Risk retention

Answer

Risk avoidance

Answer

Risk transfer

Answer

Risk reduction

Question 7

What does 'subrogation' mean in insurance terms?

Accepted Answer

An insurer's right to recover costs from at-fault parties

Answer

Canceling a policy mid-term

Answer

Dividing coverage among multiple insurers

Answer

Renewing a policy automatically

Question 8

Which factor most affects life insurance premium calculations?

Accepted Answer

Policyholder's age

Answer

Policyholder's annual income

Answer

Insurer's stock performance

Answer

Current interest rates

Question 9

What is the key difference between term and whole life insurance?

Accepted Answer

Whole life combines death benefit with cash value accumulation

Answer

Term insurance has investment components

Answer

Term insurance never expires

Answer

Whole life is only for short-term needs