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 finances a vehicle and purchases Credit Life insurance. What does Credit Life insurance pay upon the insured borrower's death?
Answer: The outstanding loan balance, paid directly to the lending institution
Credit Life insurance pays off the remaining loan balance to the lender upon the borrower's death, protecting the co-signer and estate from the debt.
Which of the following is an example of an 'exclusionary' (bumper-to-bumper) VSC coverage approach?
Answer: All mechanical and electrical components are covered except those specifically listed as excluded
An exclusionary contract covers everything except items explicitly listed as excluded, making it the broadest form of VSC coverage.
A finance manager presents Credit Disability Insurance to a customer. What event triggers a benefit payment under this coverage?
Answer: The customer becomes temporarily or permanently disabled and cannot make loan payments
Credit Disability (Accident & Health) insurance makes loan payments on the customer's behalf when the insured borrower is disabled and unable to work.
Under the FTC's Credit Practices Rule, which practice is prohibited when selling credit insurance in connection with a vehicle loan?
Answer: Requiring credit insurance as a condition of loan approval
The FTC Credit Practices Rule prohibits conditioning loan approval on the purchase of credit insurance, as this is considered an unfair or deceptive act.
A Paintless Dent Repair (PDR) protection product typically covers which of the following?
Answer: Minor dents and dings from parking lot incidents where paint is undamaged
PDR protection covers minor dents and dings where the paint surface is intact and can be repaired without repainting using the paintless technique.
What is 'pro-rata' cancellation of a VSC, and how does it differ from '90-day' or 'short-rate' cancellation?
Answer: Pro-rata returns the exact unused portion of the premium; short-rate applies a penalty, returning less than the unused portion
Pro-rata cancellation refunds the exact proportional unused premium, while short-rate cancellation includes a penalty that reduces the refund amount.
Which federal law requires that the cost of single-premium credit insurance be included in the calculation of the Annual Percentage Rate (APR) disclosed to the borrower?
Answer: Regulation Z / Truth in Lending Act (TILA)
Regulation Z under TILA requires that single-premium credit insurance financed into the loan be included in the finance charge and reflected in the disclosed APR.