Advanced Diploma of Financial Planning (ADFP) Practice Test

Automobile insurance primarily serves to protect against:

1. Business losses.

2. Vehicle theft and accidents.

3. Home repair costs.

4. Medical hospital bills.

The correct answer is: Vehicle theft and accidents.

Automobile insurance is specifically designed to safeguard individuals from financial losses that can arise from vehicle-related issues, primarily covering scenarios such as accidents and vehicle theft. This protection is critical because vehicle accidents can lead to substantial costs, including repairs to the damaged vehicle, medical expenses for injuries sustained, and liability for damages inflicted on other parties or their property. Additionally, comprehensive coverage components within automobile insurance policies protect against theft and vandalism of the insured vehicle. The other options relate to different types of insurance or financial protection areas. Business losses pertain to commercial insurance policies, while home repair costs are typically managed through homeowners' insurance. Lastly, medical expenses, particularly those not relating to automobile accidents, are covered by health insurance. Therefore, the focus on B reflects the essential protections provided by automobile insurance specifically for drivers and their vehicles.