knowledge topics
Foundations of Risk and Insurance
KNOWLEDGE EXPECTED OF: Both CFP® Professionals and QAFPTM 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
- 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
- Explain the potential impact on net worth and cash flow due to a peril.
- Define risk.1
- Explain methods that may be undertaken to manage risk, such as:
- Risk avoidance
- Risk reduction
- Risk transfer/sharing
- Risk retention
- Explain types of risks against which insurance may protect, such as:
- Personal
- Property
- Liability
- Failure of others
- Explain how insurance uses the concept of pooling risk 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
- 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
- Property and casualty insurance
- Identify the types of insurance that are mandatory.
- Explain 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
- Explain the implications of under- or over- insurance coverage.
† While individuals may view insurance being provided through such sources as their financial institution in the form of creditor insurance or their employer under the provision of a group insurance plan, the actual insurance is provided by an insurance company.
Glossary of Verbs (mouse over to see definition)
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
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Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
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Compare
To note the similarities and differences between two or more things
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Estimate
To determine an approximate value for
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Calculate
To find the value using mathematics
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Convert
To change from one form or purpose to another
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Evaluate
To reach a conclusion or make a judgement through careful study
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Interpret
To give the meaning of / to construe or understand / to translate orally
Read more about the Taxonomy used in the FP-BoK
REFERENCES
- https://www.canada.ca/en/financial-consumer-agency/services/insurance/determining-insurance-needs.html
- https://www.canada.ca/en/financial-consumer-agency/services/insurance/get-insurance.html
- https://www.canada.ca/en/financial-consumer-agency/services/insurance/get-insurance.html
- https://www.canada.ca/en/financial-consumer-agency/services/insurance/get-insurance.html
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