Exam (elaborations)
CPCU 500: VOCABULARY QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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CPCU 500: VOCABULARY QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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CPCU 500: VOCABULARY QUESTIONSAND ANSWERS WITH SOLUTIONS 2024
Probability - ANSWER The likelihood that an outcome or event will occur.
Pure Risk - ANSWER A chance of loss or no loss, but no chance of gain.
Speculative Risk - ANSWER A chance of loss, no loss, or gain.
Credit Risk - ANSWER The risk that customers or other creditors will fail to make promised payments as
they come due.
Subjective Risk - ANSWER The perceived amount of risk based on an individual's or organization's
opinion.
Objective Risk - ANSWER The measurable variation in uncertain outcomes based on facts and data.
Diversifiable Risk - ANSWER A risk that affects only some individuals, businesses, or small groups.
Systemic Risk - ANSWER The potential for a major disruption in the function of an entire market or
financial system.
Market Risk - ANSWER Uncertainty about an investment's future value because of potential changes in
the market for that type of investment.
Liquidity Risk - ANSWER The risk that an asset cannot be sold on short notice without incurring a loss.
Risk Source - ANSWER Element which alone or in combination has the intrinsic potential to give rise to
risk.
Risk Management - ANSWER The process of making and implementing decisions that will minimize the
adverse effects of accidental losses on an organization.
, Loss Exposure - ANSWER Any condition or situation that presents a possibility of loss, whether or not an
actual loss occurs.
Hazard - ANSWER A condition that increases the frequency or severity of a loss.
Moral Hazard - ANSWER A condition that increases the likelihood that a person will intentionally cause or
exaggerate a loss.
Morale Hazard (Attitudinal Hazard) - ANSWER A condition of carelessness or indifference that increases
the frequency or severity of loss.
Physical Hazard - ANSWER A tangible characteristic of property, persons, or operations that tends to
increase the frequency or severity of loss.
Legal Hazard - ANSWER A condition of the legal environment that increases loss frequency or severity.
Property Loss Exposure - ANSWER A condition that presents the possibility that a person or an
organization will sustain a loss resulting from damage (including destruction, taking, or loss of use) to
property in which that person or organization has a financial interest.
Tangible Property - ANSWER Property that has a physical form.
Real Property (Realty) - ANSWER Tangible property consisting of land, all structures permanently
attached to the land, and whatever is growing on the land.
Personal Property - ANSWER All tangible or intangible property that is not real property.
Intangible Property - ANSWER Property that has no physical form.
Liability Loss Exposure - ANSWER Any condition or situation that presents the possibility of a claim
alleging legal responsibility of a person or business for injury or damage suffered by another party.
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