Foundations of Risk and Insurance
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Awareness
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
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Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Identify key trends related to insurance, such as:
- Consolidation of insurance companies
- Growth of reinsurance
- Changing tax legislation
- Evolution of underwriting processes
- Increased concerns over privacy of data used to adjudicate insurance applications
- Define a peril.
- Identify potential perils that may cause possible loss, such as:
- Deterioration of health
- Disability
- Death
- Outliving financial resources
- Liability issues
- Property damage
- Loss of information/data
- Identify the potential impact on net worth and cash flow due to a peril.
- Define risk.1
- Identify methods that may be undertaken to manage risk, such as:
- Risk avoidance
- Risk reduction
- Risk transfer/sharing
- Risk retention
- Identify types of events against which insurance may protect, such as:
- Personal
- Property
- Liability
- Failure of others
- Identify how insurance uses the concept of risk pooling to cover a loss.
- Identify how insurance uses the concept of risk transfer/risk sharing to cover a loss.
- Define types of insurance that may be used to transfer/share risk, such as:
- Property and casualty insurance
- Automobile insurance
- Home insurance / condominium insurance
- Tenant / renter insurance
- Title insurance
- Liability insurance
- Commercial insurance
- Health care insurance
- Government health care insurance
- Private health services plans
- Living benefits
- Disability insurance
- Critical Illness insurance
- Long-term care insurance
- Life insurance
- Term insurance
- Permanent insurance
- Term-to-100
- Whole life insurance
- Universal life insurance
- Identify the types of insurance that are mandatory.
- Define the purpose of each type of insurance.
- Define sources from which insurance may be purchased.2
- Licensed insurance agent3
- Registered insurance broker4
- Insurance company†
- Identify types of insurance companies.
- Stock insurance company
- Mutual insurance company
- Fraternal
- Identify the implications of under- or over- insurance coverage.
† While individuals may view insurance as being provided by their financial institution (e.g., for creditor insurance) or their employer (e.g., for group insurance), the insurance coverage is provided by an insurance company.
REFERENCES
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Understanding
Knowledge Levels and Associated Verbs
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
---|---|---|---|---|---|---|---|---|---|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Define a peril.
- Identify potential perils that may cause possible loss, such as:
- Deterioration of health
- Disability
- Death
- Outliving financial resources
- Liability issues
- Property damage
- Loss of information/data
- Define risk.1
- Define types of insurance that may be used to transfer/share risk, such as:
- Property and casualty insurance
- Automobile insurance
- Home insurance / condominium insurance
- Tenant / renter insurance
- Title insurance
- Liability insurance
- Commercial insurance
- Health care insurance
- Government health care insurance
- Private health services plans
- Living benefits
- Disability insurance
- Critical Illness insurance
- Long-term care insurance
- Life insurance
- Term insurance
- Permanent insurance
- Term-to-100
- Whole life insurance
- Universal life insurance
- Identify the types of insurance that are mandatory.
- Define sources from which insurance may be purchased.2
- Licensed insurance agent3
- Registered insurance broker4
- Insurance company†
- Identify types of insurance companies.
- Stock insurance company
- Mutual insurance company
- Fraternal
† While individuals may view insurance as being provided by their financial institution (e.g., for creditor insurance) or their employer (e.g., for group insurance), the insurance coverage is provided by an insurance company.
Additional Knowledge Expected of CFP Professionals
- Explain key trends related to insurance, such as:
- Consolidation of insurance companies
- Growth of reinsurance
- Changing tax legislation
- Evolution of underwriting processes
- Increased concerns over privacy of data used to adjudicate insurance applications
- Explain the potential impact on net worth and cash flow due to a peril.
- Explain methods that may be undertaken to manage risk, such as:
- Risk avoidance
- Risk reduction
- Risk transfer/sharing
- Risk retention
- Explain types of events against which insurance may protect, such as:
- Personal
- Property
- Liability
- Failure of others
- Explain how insurance uses the concept of risk pooling to cover a loss.
- Explain how insurance uses the concept of risk transfer/risk sharing to cover a loss.
- Explain the purpose of each type of insurance.
- Explain the implications of under- or over- insurance coverage.