Insurance Product Knowledge Flashcards
7 cards from real AFIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Product Knowledge flashcards as text
A customer purchases a Guaranteed Asset Protection (GAP) waiver on a new vehicle. What does GAP primarily cover?
Answer: The difference between the vehicle's ACV and the remaining loan balance
GAP covers the shortfall between the insurance settlement (actual cash value) and the outstanding loan or lease balance after a total loss.
Which of the following best describes a 'stated amount' provision in a vehicle insurance policy?
Answer: The insurer pays whichever is less: ACV, cost to repair, or the stated amount
A stated amount provision means the insurer pays the lesser of ACV, repair cost, or the stated amount — it does not guarantee the full stated value.
A dealer offers a Tire & Wheel protection product. Which event would most likely be EXCLUDED under a standard Tire & Wheel contract?
Answer: Cosmetic curb rash on a wheel without structural damage
Cosmetic damage such as curb rash that does not affect structural integrity or driveability is typically excluded from Tire & Wheel contracts.
Under a Vehicle Service Contract (VSC), what is the purpose of a 'waiting period' or 'exclusionary period'?
Answer: To prevent claims for pre-existing conditions or failures that occur very soon after purchase
Waiting periods protect administrators from claims on failures that were pre-existing or imminent at the time of sale.
What is the primary regulatory distinction between a Vehicle Service Contract (VSC) and a mechanical breakdown insurance (MBI) policy?
Answer: MBI is regulated as insurance by state insurance commissioners; VSCs are typically regulated under consumer protection or warranty statutes
MBI is treated as an insurance product and regulated by state insurance departments, while VSCs are generally governed by warranty or consumer protection laws.
A customer's vehicle is declared a total loss. The vehicle had a Debt Cancellation Contract (DCC). How does a DCC differ from a GAP waiver in handling the deficiency balance?
Answer: A DCC is a loan contract feature that cancels the debt; a GAP waiver is administered separately and reimburses the lender
A DCC is embedded in the credit agreement and cancels the remaining debt at the lender level, while a GAP waiver is a separate product that reimburses the deficiency.
Which type of VSC pricing structure means the dealer retains unearned reserve funds if the contract is cancelled early?
Answer: Reinsurance captive program
In a reinsurance captive program, the dealer's captive entity holds unearned premium reserves, so early cancellations result in the dealer retaining those funds.