Financial Counseling Certification Program (FiCEP) Practice Exam

Which of the following is not an insurance decision rule?

1. Add insurance coverage for all assets

2. Assess the value of high-risk assets

3. Evaluate personal liability risks

4. Consider potential future claims

The correct answer is: Add insurance coverage for all assets

The choice to add insurance coverage for all assets does not align with an effective insurance decision-making process. Insurance decision rules are typically designed to prioritize and evaluate where coverage is necessary rather than applying a blanket approach to all assets. In practice, effective risk management involves assessing the unique value and risks associated with individual assets. For example, some assets may inherently carry a higher risk of loss, such as a car in an area prone to accidents or natural disasters. Evaluating personal liability risks and considering potential future claims are also critical components of making informed insurance decisions. These steps ensure that coverage is tailored to specific circumstances, which is more efficient and financially responsible than simply insuring everything without consideration of the associated risks and values. By focusing on high-risk assets and potential liabilities, individuals can make strategic decisions that provide adequate protection without incurring unnecessary costs.