Geico Assessment Test Insurance Concepts — Questions and Answers
Question 1: What is subrogation in insurance?
- A type of coverage
- The process where an insurer seeks reimbursement from the at-fault party after paying a claim (Correct answer)
- A policy cancellation
- A premium refund
Correct answer: The process where an insurer seeks reimbursement from the at-fault party after paying a claim
After paying a claim, the insurer may pursue the at-fault party to recover the amount paid, protecting both the insurer and keeping premiums lower.
Question 2: What is an insurance binder?
- A filing cabinet
- A temporary agreement providing immediate coverage until the formal policy is issued (Correct answer)
- A policy cancellation notice
- A premium payment
Correct answer: A temporary agreement providing immediate coverage until the formal policy is issued
A binder provides immediate proof of coverage while the full policy is being prepared, typically valid for 30-90 days.
Question 3: What is an insurance endorsement?
- A celebrity recommendation
- A modification or addition to an existing insurance policy that changes its coverage terms (Correct answer)
- A type of discount
- A claim denial
Correct answer: A modification or addition to an existing insurance policy that changes its coverage terms
Endorsements (riders) add, remove, or modify coverage on an existing policy, allowing customization without issuing a new policy.
Question 4: What is the difference between replacement cost and actual cash value?
- They are the same
- Replacement cost pays to replace the item at current prices; actual cash value deducts depreciation (Correct answer)
- Replacement cost is always cheaper
- Actual cash value pays more
Correct answer: Replacement cost pays to replace the item at current prices; actual cash value deducts depreciation
Replacement cost covers the full cost to replace an item with a new equivalent. Actual cash value subtracts depreciation, paying less for older items.
Question 5: What is umbrella insurance?
- Insurance for umbrellas
- Extra liability coverage that extends beyond the limits of your auto or home policy (Correct answer)
- A type of flood insurance
- Temporary coverage
Correct answer: Extra liability coverage that extends beyond the limits of your auto or home policy
Umbrella insurance provides additional liability protection above and beyond what standard policies cover, typically in $1 million increments.
Question 6: What is an SR-22?
- A military vehicle
- A certificate of financial responsibility filed with the state proving you carry the required minimum auto insurance (Correct answer)
- A type of coverage
- A discount form
Correct answer: A certificate of financial responsibility filed with the state proving you carry the required minimum auto insurance
SR-22 is typically required after serious driving violations (DUI, driving without insurance) as proof that you maintain the state-mandated minimum coverage.
Geico Assessment Test Insurance Concepts
What is subrogation in insurance?