10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
The AFE-FA exam has 50 questions and runs 3 hours.
These 10 free AFE-FA questions are organized by exam domain, so you can see how each part of the Accredited Financial Examiner blueprint is tested. Reveal the answer and explanation under each question.
An annual statement shows that a universal life policy's account value has fallen to zero. The owner has paid every premium required by its secondary no-lapse guarantee on time, has taken no loans or withdrawals, and has made no policy changes. The guarantee period has 12 years remaining. How should the owner interpret the zero account value?
Correct answer: A - Death coverage remains in force under the secondary guarantee, despite the depleted account.
A 76-year-old can bathe, dress, eat, toilet, transfer, and manage continence without assistance. However, she repeatedly wanders into traffic and leaves cooking unattended. Last month, a licensed health care practitioner certified that severe cognitive impairment requires substantial supervision for her safety and prescribed a care plan. Her tax-qualified long-term-care policy uses the federal chronic-illness criteria. All other coverage and elimination-period requirements are met. What determines her eligibility?
Correct answer: C - Her certified need for substantial supervision satisfies the separate cognitive-impairment trigger.
After a life insurer removes medical underwriting for a uniformly priced product, applicants with previously diagnosed serious illnesses buy coverage disproportionately often and select larger benefits. Mortality in the target population is unchanged, and there is no evidence that insureds change their behavior after purchase. The deterioration in the insurer's claims experience is best attributed to:
Correct answer: A - Adverse selection in the risks entering the insured pool.
A professional liability policy covers claims first made against the insured and reported to the insurer from January 1 through December 31, 2025, arising from wrongful acts on or after its January 1, 2023 retroactive date. An error occurs in August 2024. The client first demands compensation on December 18, 2025, but the insured reports the claim on January 8, 2026. No reporting extension, grace provision, or other policy applies. Applying these timing terms, does this policy respond?
Correct answer: D - No; the claim was reported to the insurer after the policy period ended.
One hurricane produces covered losses of $1.9 million, $1.8 million, and $1.6 million at three insured locations. A catastrophe treaty provides $3 million of coverage excess of a $1 million retention per occurrence. The treaty treats all three losses as one occurrence; its full limit is available, and no other recoveries or expenses apply. After the treaty responds, how much of the hurricane loss remains with the ceding insurer?
Correct answer: B - $2.3 million
A life insurer has prepaid next year's systems-maintenance fees. The prepayment meets GAAP asset-recognition criteria, and there is no impairment. The applicable statutory accounting rule requires it to be nonadmitted. In reconciling the two statements, the accountant should:
Correct answer: B - Reduce admitted assets and statutory surplus without writing off the GAAP asset.
Falling market interest rates allow a life insurer to sell performing fixed-rate bonds at a gain. The issuers' credit quality has not changed. Under the ordinary statutory treatment of interest-related realized gains, which recognition pattern applies?
Correct answer: D - Defer the gain through the Interest Maintenance Reserve and amortize it over the relevant remaining asset periods.
A property-casualty insurer issues an unusually large volume of annual policies in December. The business is adequately priced, premium receivables are collectible, and expected loss experience has not deteriorated. Nevertheless, writing the business reduces year-end statutory surplus. What best explains this new-business strain?
Correct answer: C - Acquisition costs are expensed immediately, while premium is earned over the coverage period.
For the calendar year, a property-casualty insurer paid $48 million in losses, including $6 million on accidents from earlier years. Unpaid loss reserves were $17 million at the beginning of the year and $22 million at year-end. All amounts are gross of reinsurance and exclude loss adjustment expenses. The controller reports $47 million in incurred losses after removing the prior-year accident payments. What amount belongs in the calendar-year incurred-loss total?
Correct answer: C - $53 million
A property-casualty insurer reports a risk-based capital ratio of 165%, calculated as total adjusted capital divided by Authorized Control Level RBC. Its state follows the NAIC model act, and no other action-level trigger is present. Management argues that no response is required because the ratio exceeds 100%. The appropriate conclusion is:
Correct answer: B - A Company Action Level event has occurred, requiring an RBC plan for regulatory review.
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