Practice Test Geeks(GAP) Guaranteed Asset Protection Certified Practice Test
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Financial Analysis & Reporting Flashcards

7 cards from real GAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Analysis & Reporting flashcards as text

  1. A vehicle is totaled with an ACV of $18,000 and an outstanding loan balance of $22,500. The primary insurer pays $18,000. What is the GAP benefit payable before any applicable deductible waiver?

    Answer: $4,500

    GAP benefit = outstanding loan balance minus ACV insurance payout = $22,500 − $18,000 = $4,500.

  2. For GAAP financial statement purposes, how should unearned GAP premiums be classified on the balance sheet?

    Answer: As a current liability

    Unearned premiums represent obligations to provide future coverage and are classified as current liabilities because they are expected to be earned within 12 months for most GAP terms.

  3. Which of the following best describes a 'ceded loss ratio' in GAP reinsurance reporting?

    Answer: Losses transferred to reinsurers divided by ceded premiums

    The ceded loss ratio measures the losses passed to reinsurers relative to the premiums ceded to those reinsurers, indicating the value of the reinsurance arrangement.

  4. An actuarial analysis of a GAP book reveals an ultimate loss pick of 45% of earned premium. If the carried loss reserve is 40%, what action is required?

    Answer: Strengthen the reserve by 5 points

    When the actuarially indicated ultimate loss ratio (45%) exceeds the carried reserve ratio (40%), the administrator must strengthen reserves to avoid understatement of liabilities.

  5. In GAP program financial analysis, which metric is used to evaluate the effectiveness of a dealer's cancellation and refund processing?

    Answer: Cancellation refund turnaround time and accuracy rate

    Cancellation refund turnaround time and accuracy rate directly measures how efficiently and correctly dealers and administrators process pro-rata or short-rate refunds upon early contract termination.

  6. When computing a pro-rata cancellation refund for a GAP product cancelled at month 18 of a 60-month term, what percentage of the original premium is refunded (ignoring fees)?

    Answer: 70%

    Months remaining = 60 − 18 = 42; refund % = 42/60 = 70% of the original premium under pro-rata calculation.

  7. Which report would a GAP program administrator use to reconcile remittances from dealer partners against policies issued?

    Answer: Premium bordereaux

    A premium bordereaux is a detailed schedule of individual policies that dealers submit to administrators, enabling reconciliation of remitted funds against issued contracts.