AFIP Insurance Product Knowledge

Question 1

What is the main purpose of term life insurance?

Accepted Answer

Provide coverage for a limited time

Answer

Term life insurance is designed to provide a death benefit for a specific period, such as 10, 20, or 30 years. It is typically more affordable than permanent life insurance because it does not accumulate cash value and only pays out if the insured dies within the specified term. Its main purpose is to offer financial protection for dependents during critical periods, like when a mortgage is outstanding or children are young.

Question 2

Which insurance type combines a death benefit with a savings component?

Accepted Answer

Whole life insurance

Answer

Whole life insurance is a type of permanent life insurance that provides coverage for the insured's entire life, as long as premiums are paid. Unlike term life, it includes a cash value component that grows over time on a tax-deferred basis. This cash value can be borrowed against or withdrawn, making it a combination of a death benefit and a savings/investment vehicle.

Question 3

What is an annuity primarily used for?

Accepted Answer

Generate retirement income

Answer

An annuity is a financial product sold by insurance companies designed to provide a steady stream of income, typically during retirement. Individuals pay a lump sum or make periodic payments, and in return, receive regular payments starting immediately or at a future date. Its primary function is to offer a guaranteed income source, helping to mitigate the risk of outliving one's savings.

Question 4

Which insurance covers medical expenses for illness or injury?

Accepted Answer

Health insurance

Answer

Health insurance is a type of insurance that covers medical expenses that arise due to illness, injury, or preventive care. It typically helps pay for doctor visits, hospital stays, prescription drugs, and other healthcare services. Its purpose is to protect individuals from the high costs of medical care, making essential health services more accessible.

Question 5

What is a deductible in an insurance policy?

Accepted Answer

The amount paid out-of-pocket before insurance kicks in

Answer

A deductible is the specific amount of money an insured person must pay out of their own pocket for covered medical expenses or damages before their insurance company starts paying. For example, if you have a $1,000 deductible, you pay the first $1,000 of a claim, and then your insurance covers the rest, up to the policy limits. It's a common feature in many types of insurance policies, including health, auto, and home.

(AFIP) Certified Association of Finance & Insurance Professionals Practice Test

(AFIP) Certified Association of Finance & Insurance Professionals Practice Test

AFIP Insurance Product Knowledge