FREE AFC Risk Management and Insurance Questions and Answers

Question 1

A client is reviewing their homeowner's insurance policy and is confused about the difference between an HO-3 and an HO-5 policy.
Which of the following is the most significant advantage of an HO-5 policy over an HO-3 policy?

Accepted Answer

HO-5 provides open peril coverage for personal property, while HO-3 typically provides named peril coverage.

Answer

HO-5 policies are significantly less expensive than HO-3 policies.

Answer

HO-5 automatically includes flood and earthquake coverage, which are excluded from HO-3.

Answer

HO-5 provides open peril coverage for the dwelling, while HO-3 provides named peril coverage for the dwelling.

Question 2

An AFC® is working with a client who has a disability income insurance policy with a 90-day elimination period. The client becomes disabled on June 1st. When can the client expect to receive their first benefit payment?

Accepted Answer

Shortly after August 30th

Answer

On June 1st of the following year

Answer

On September 1st

Answer

On June 2nd

Question 3

Which of the following risk management strategies involves shifting the financial consequences of a loss to another party, such as an insurance company?

Accepted Answer

Risk Transfer

Answer

Risk Avoidance

Answer

Risk Retention

Answer

Risk Reduction

Question 4

A client is at fault in a car accident. Their auto insurance liability coverage is listed as 100/300/50. One person in the other car sustains injuries with medical bills totaling $120,000. How much will the client's insurance policy pay for this individual's bodily injury claim?

Accepted Answer

$100,000

Answer

$120,000

Answer

$300,000

Answer

$50,000

Question 5

A client with significant assets, including a home, investments, and future earnings, is concerned about being sued for an amount that exceeds the liability limits on their homeowners and auto insurance policies. Which type of insurance would an AFC® explain is specifically designed to provide an additional layer of liability protection above other policies?

Accepted Answer

Personal Umbrella Insurance

Answer

Professional Liability Insurance

Answer

Comprehensive General Liability Insurance

Answer

Replacement Cost Value Insurance

Question 6

When helping a client evaluate insurable risks, an AFC® should explain that for a risk to be ideally insurable, it must have certain characteristics. Which of the following is a key characteristic of an insurable risk?

Accepted Answer

The loss must be accidental and measurable.

Answer

The loss must be catastrophic.

Answer

The loss must be intentional.

Answer

The loss must affect a large number of policyholders simultaneously.

A client is reviewing their homeowner's insurance policy and is confused about the difference between an HO-3 and an HO-5 policy.Which of the following is the most significant advantage of an HO-5 policy over an HO-3 policy?

A client is reviewing their homeowner's insurance policy and is confused about the difference between an HO-3 and an HO-5 policy.
Which of the following is the most significant advantage of an HO-5 policy over an HO-3 policy?