AFC Insurance & Risk Management Strategies 2

Question 1

A 35-year-old with two young children and a non-working spouse asks about life insurance. What type provides the most coverage per premium dollar?

Accepted Answer

Term life insurance

Answer

Term life insurance provides the highest coverage amount per premium dollar because it offers pure death benefit without cash value.

Question 2

What is the primary purpose of disability insurance in a comprehensive financial plan?

Accepted Answer

To replace a portion of income if the insured cannot work

Answer

Disability insurance replaces a portion of earned income (typically 60-70%) when the insured cannot work due to qualifying illness or injury.

Question 3

A client has a $200,000 home with a $150,000 mortgage and $300,000 dwelling coverage. What should the counselor identify?

Accepted Answer

The coverage may be appropriate if it reflects the replacement cost to rebuild

Answer

Homeowner's insurance should cover replacement cost to rebuild, not market value or mortgage balance. Replacement cost can exceed market value.

Question 4

Which health insurance plan type typically requires a referral from a primary care physician to see a specialist?

Accepted Answer

HMO

Answer

HMO plans require members to select a primary care physician who serves as a gatekeeper for specialist referrals.

Question 5

A client is choosing between a low-deductible plan ($500 deductible, $450/month) and a high-deductible plan ($3,000 deductible, $250/month) with HSA. What analysis should the counselor perform?

Accepted Answer

Calculate total annual cost under various utilization scenarios

Answer

A thorough comparison requires modeling total costs under different utilization scenarios, plus considering HSA tax advantages.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Insurance & Risk Management Strategies 2