Risk Management and Insurance Flashcards
7 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management and Insurance flashcards as text
A client has a $500 deductible and 80/20 coinsurance with a $3,000 out-of-pocket maximum on their health plan. If they incur $10,000 in covered medical expenses, what is their total out-of-pocket cost?
Answer: $3,000
After the $500 deductible, the remaining $9,500 triggers 20% coinsurance ($1,900), totaling $2,400 — but the $3,000 OOP max caps total liability at $3,000.
Which type of life insurance policy builds cash value and allows the policyholder to adjust premium payments and death benefit amounts?
Answer: Universal life insurance
Universal life insurance combines permanent coverage with flexibility to adjust premiums and death benefits, while accumulating cash value at a credited interest rate.
An AFC client asks about 'subrogation' in insurance. Which best describes this concept?
Answer: The insurer's right to recover losses paid from a liable third party
Subrogation allows the insurer to step into the insured's shoes and pursue recovery from the responsible third party after paying a claim.
What is the primary purpose of an umbrella liability policy?
Answer: To provide excess liability coverage beyond underlying policy limits
An umbrella policy provides additional liability protection that kicks in after the limits of underlying policies (auto, homeowners) are exhausted.
A client is self-employed and has no employer-sponsored health insurance. Which marketplace option allows them to deduct 100% of health insurance premiums from their taxable income?
Answer: Self-employed health insurance deduction
Self-employed individuals may deduct 100% of health insurance premiums for themselves and their family as an above-the-line deduction on their federal income tax return.
Which disability insurance definition of disability is most favorable to the policyholder?
Answer: Own occupation
The 'own occupation' definition pays benefits if you cannot perform the duties of your specific occupation, making it most beneficial compared to broader 'any occupation' standards.
A client's homeowners policy has replacement cost coverage for personal property. Their five-year-old laptop worth $400 today is destroyed. Under replacement cost, the insurer pays:
Answer: The cost of a comparable new laptop today
Replacement cost coverage pays the cost to replace the item with a new, comparable item at today's prices, without deducting for depreciation.