AFSB 153 PRACTICE EXAMINATION
2026 QUESTIONS WITH ANSWERS
GRADED A+
◍ letter of credit.
Answer: An instrument under which the issuer (ordinarily a bank) agrees, as
requested by a customer, to honor a draft or another demand for payment
made by a third party.
◍ Noncancelable (open term) bond.
Answer: -surety is bound until the principal has performed the obligation
and the obligee has released the bond-The obligee releases the surety from
liability when the obligee is satisfied that all of the principal's obligations
have been performed.
◍ 4 types of commercial surety bonds.
Answer: L&P, public official, court bonds, miscellaneous
◍ What are L&P bonds.
Answer: guarantee performance of obligations required by a license or
permit
◍ renewable term bond.
Answer: The surety issues the bond for a specific time period and can extend
the bond term by attaching a continuation certificate
◍ continous term bond.
Answer: The bond remains in force until the surety cancels it.
◍ definite term bond.
Answer: The bond remains in force for a specified period. At the end of the
term, the bond expires. The surety must issue a new bond if coverage is still
, required.
◍ What are examples of L&P bonds?.
Answer: compliance guarantees for electricians and plumbers, license bonds
for real estate brokers and car dealers, and bonds required for hazardous
activities such as fireworks or blasting
◍ What are public official bonds.
Answer: guarantee honest and faithful performance of official duties
including receiving and accounting for money and property handled by the
principal's office
◍ cumulative liability.
Answer: the aggregate amount that an obligee can recover under two or
more bonds filed in succession by the same principal.
◍ What are examples of public official bonds?.
Answer: Bonds for tax collectors, assessors, insurance commissioners,
judges, and sheriffs.
◍ Who must post federal official bonds?.
Answer: Federal officials.
◍ Loss caps.
Answer: -can enable sureties to underwrite and rate risk profitably-can't add
to statutory bonds
◍ loss costs.
Answer: -The portion of the rate that covers projected claim payments and
loss adjusting expenses.-advisory rates based solely on loss
experience-SFAA helps out
◍ loss cost multipliers.
Answer: The factor that provides for differences in expected loss, individual
company expenses, underwriting profit, and contingencies; when multiplied
with a loss cost, it produces a rate
◍ prior approval.
2026 QUESTIONS WITH ANSWERS
GRADED A+
◍ letter of credit.
Answer: An instrument under which the issuer (ordinarily a bank) agrees, as
requested by a customer, to honor a draft or another demand for payment
made by a third party.
◍ Noncancelable (open term) bond.
Answer: -surety is bound until the principal has performed the obligation
and the obligee has released the bond-The obligee releases the surety from
liability when the obligee is satisfied that all of the principal's obligations
have been performed.
◍ 4 types of commercial surety bonds.
Answer: L&P, public official, court bonds, miscellaneous
◍ What are L&P bonds.
Answer: guarantee performance of obligations required by a license or
permit
◍ renewable term bond.
Answer: The surety issues the bond for a specific time period and can extend
the bond term by attaching a continuation certificate
◍ continous term bond.
Answer: The bond remains in force until the surety cancels it.
◍ definite term bond.
Answer: The bond remains in force for a specified period. At the end of the
term, the bond expires. The surety must issue a new bond if coverage is still
, required.
◍ What are examples of L&P bonds?.
Answer: compliance guarantees for electricians and plumbers, license bonds
for real estate brokers and car dealers, and bonds required for hazardous
activities such as fireworks or blasting
◍ What are public official bonds.
Answer: guarantee honest and faithful performance of official duties
including receiving and accounting for money and property handled by the
principal's office
◍ cumulative liability.
Answer: the aggregate amount that an obligee can recover under two or
more bonds filed in succession by the same principal.
◍ What are examples of public official bonds?.
Answer: Bonds for tax collectors, assessors, insurance commissioners,
judges, and sheriffs.
◍ Who must post federal official bonds?.
Answer: Federal officials.
◍ Loss caps.
Answer: -can enable sureties to underwrite and rate risk profitably-can't add
to statutory bonds
◍ loss costs.
Answer: -The portion of the rate that covers projected claim payments and
loss adjusting expenses.-advisory rates based solely on loss
experience-SFAA helps out
◍ loss cost multipliers.
Answer: The factor that provides for differences in expected loss, individual
company expenses, underwriting profit, and contingencies; when multiplied
with a loss cost, it produces a rate
◍ prior approval.
