AFC Risk Management and Insurance 4

Question 1

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?

Accepted Answer

$3,000

Answer

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.

Question 2

Which type of life insurance policy builds cash value and allows the policyholder to adjust premium payments and death benefit amounts?

Accepted Answer

Universal life insurance

Answer

Universal life insurance combines permanent coverage with flexibility to adjust premiums and death benefits, while accumulating cash value at a credited interest rate.

Question 3

An AFC client asks about 'subrogation' in insurance. Which best describes this concept?

Accepted Answer

The insurer's right to recover losses paid from a liable third party

Answer

Subrogation allows the insurer to step into the insured's shoes and pursue recovery from the responsible third party after paying a claim.

Question 4

What is the primary purpose of an umbrella liability policy?

Accepted Answer

To provide excess liability coverage beyond underlying policy limits

Answer

An umbrella policy provides additional liability protection that kicks in after the limits of underlying policies (auto, homeowners) are exhausted.

Question 5

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?

Accepted Answer

Self-employed health insurance deduction

Answer

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.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Risk Management and Insurance 4