CFP Risk Management and Insurance Planning Practice Questions

Correct answer: A. $260,000

Split limits apply to each injured person up to the per-person limit and to the accident in total up to the per-accident limit. Payments of $100,000, $100,000 and $60,000 equal $260,000, within the $300,000 aggregate.

• A. Per-person limits cap the first two claims at $100,000 each, plus $60,000, for $260,000, below the per-accident cap.
• B. This pays full damages, exceeding both the per-person and the per-accident limits.
• C. This applies the per-accident limit alone, ignoring that each claimant is capped at the per-person limit.
• D. This applies the per-person limit once to the whole accident rather than to each injured claimant.

Correct answer: D. HSA balances are owned by the employee, are fully portable, and generally roll over year to year, while FSA funds are typically 'use-it-or-lose-it,' subject to limited carryover or grace-period exceptions

HSAs are individually owned, fully portable across jobs, and unused balances roll over indefinitely, growing tax-deferred. FSAs are employer-owned accounts subject to 'use-it-or-lose-it' rules, with only a limited carryover amount or a short grace period permitted by the IRS, and balances are generally forfeited upon termination unless COBRA continuation of the FSA is elected. FSAs do not require HDHP enrollment, and both accounts can accept pre-tax contributions.

• A. Wrong — this reverses the accounts' characteristics; it's the HSA, not the FSA, that is portable and belongs to the employee after separation.
• B. Wrong — both HSA and FSA contributions can be made on a pre-tax basis through payroll and are not reported as taxable W-2 wages; that isn't the key distinguishing feature between the two.
• C. Wrong — only the HSA requires enrollment in a qualifying high-deductible health plan, and the two accounts have different contribution limits.
• D. Correct — HSAs are employee-owned, fully portable, and roll over year to year, while FSA funds are generally 'use-it-or-lose-it' subject only to limited carryover or grace-period exceptions.

Correct answer: C. Quantify lost earnings, childcare replacement, debts and goals for each spouse separately

Each spouse's death creates an economic loss that includes lost earnings, the cost of replacing unpaid childcare, debts and goals. A needs analysis for each spouse is sounder than a multiple of income.

• A. A multiple of income ignores the family's actual obligations and the assets available to meet them.
• B. The lower earner's death also creates real costs, especially replacing childcare, so leaving that spouse uninsured creates a gap.
• C. Correct: a separate needs analysis for each spouse captures earnings, caregiving, debts and goals.
• D. Childcare replacement is a real, measurable cost even though it has no pay stub.

Correct answer: B. The dwelling is covered on an open-perils basis, while personal property is covered only against perils specifically named in the policy

The HO-3 'Special Form' is the most common homeowners policy and is distinguished by covering the dwelling and other structures on an open-perils (all-risk) basis - covered unless specifically excluded - while personal property (Coverage C) is covered only against named perils listed in the policy, similar to an HO-2 broad form. An HO-5 upgrades personal property to open-perils as well.

• A. Incorrect - this describes an HO-5 policy, not a standard unendorsed HO-3.
• B. Correct - this is the defining coverage structure of an HO-3 policy.
• C. Incorrect - reverses the actual structure; the dwelling, not contents, gets open-perils treatment.
• D. Incorrect - this describes an HO-2 broad form, not HO-3.