AIC 302 STANDARD EXAMS ANSWERS AND
QUESTIONS SET A+
✔✔Replacement cost - ✔✔The cost to repair or replace property using new materials of
like kind and quality with no deduction for depreciation.
✔✔Actual cash value (ACV) - ✔✔The cost to replace property with new property of like
kind and quality less depreciation. To calculate ACV, claims reps must determine the
replacement cost and then subtract depreciation.
✔✔Auto physical damage claims generally involve one of three scenarios: - ✔✔The
vehicle is damaged and repairable.
The vehicle is damaged beyond repair.
The vehicle is stolen and not recovered.
✔✔When a vehicle is repairable, the claims rep - ✔✔obtains an estimate and then
concludes the claim by paying the insured the amount needed to repair the damage,
minus the deductible.
✔✔When a vehicle is declared a total loss because it's not recovered or because of
damage, the claims rep must determine two things: - ✔✔the vehicle's pre-accident ACV
and any salvage value the damaged vehicle may have.
✔✔Salvage value is the amount that a - ✔✔salvage yard pays for the damaged vehicle
minus expenses, such as towing and storage.
✔✔How would you determine a car's pre-accident ACV and salvage value? - ✔✔A
claims rep can determine pre-accident ACV by using reference material such as that
provided by Kelley Blue Book or the National Automobile Dealers Association. The
claims rep must know the vehicle's make, model, year, and mileage, along with any
optional equipment, to correctly determine the ACV.
Salvage value can be determined by obtaining bids from various salvage dealers, either
through a salvage pool or a bid process.
, ✔✔Direct repair programs (DRPs) - ✔✔A program by which insurers provide a network
of repair facilities that meet the insurer's criteria for quality work at cost-effective prices.
✔✔Not all damaged parts need to be replaced in all circumstances; sometimes
damaged parts can be repaired. What factors do you think should be considered when
deciding whether to repair or replace a part? - ✔✔Generally, a part should be replaced
if repairs are not cost-effective or if they won't return the vehicle to its pre-loss condition.
Typically, if a part's repair cost exceeds a set percentage of its replacement cost (for
example, if the repair will cost more than 75 percent of the replacement cost), it may be
appropriate to replace the part. Plus, it may be more likely that repaired parts will be
misaligned or not function as well (or for as long) as new parts. These are all factors
that must be considered when appraising damage and repairs.
✔✔original equipment manufacturer (OEM) parts - ✔✔A new vehicle part that is made
by the vehicle's original equipment manufacturer.
✔✔Aftermarket (AM) parts - ✔✔A new vehicle part that is made by a manufacturer other
than the vehicle manufacturer.
✔✔Like kind and quality (LKQ) parts - ✔✔A vehicle part that is taken from a salvage
yard and that is of like kind and quality to the original part.
✔✔Why do you think claimants would be more likely to object to the use of AM and LKQ
parts? - ✔✔Claimants may be more likely to object to the use of AM and LKQ parts
because they may not last as long, may not come with a long warranty, and may
depreciate the car's value.
✔✔Actual total loss - ✔✔when repair is physically impossible (for example, if an auto is
stolen and not recovered)
✔✔Constructive total loss - ✔✔when the loss estimate equals or exceeds the auto's
actual cash value (ACV) less its salvage value
✔✔Greatview Insurance has a total loss threshold of 80 percent. An insured's Honda
Pilot sustains physical damage in an accident that will cost $9,000 to repair. The
vehicle's preaccident ACV was $15,000. Is the vehicle a total loss? - ✔✔No. The repair
costs equal 60 percent of the vehicle's ACV ($9,000 ÷ $15,000 = 0.60), which is lower
than the insurer's 80 percent total loss threshold. This means the vehicle is a partial
loss.
✔✔Three Hills Insurance uses a total loss formula. An insured's Jeep Wrangler
sustained physical damage in an accident that will cost $7,000 to repair. The vehicle's
salvage value is $2,500. The Jeep's preaccident ACV was $9,000. Is this vehicle a total
QUESTIONS SET A+
✔✔Replacement cost - ✔✔The cost to repair or replace property using new materials of
like kind and quality with no deduction for depreciation.
✔✔Actual cash value (ACV) - ✔✔The cost to replace property with new property of like
kind and quality less depreciation. To calculate ACV, claims reps must determine the
replacement cost and then subtract depreciation.
✔✔Auto physical damage claims generally involve one of three scenarios: - ✔✔The
vehicle is damaged and repairable.
The vehicle is damaged beyond repair.
The vehicle is stolen and not recovered.
✔✔When a vehicle is repairable, the claims rep - ✔✔obtains an estimate and then
concludes the claim by paying the insured the amount needed to repair the damage,
minus the deductible.
✔✔When a vehicle is declared a total loss because it's not recovered or because of
damage, the claims rep must determine two things: - ✔✔the vehicle's pre-accident ACV
and any salvage value the damaged vehicle may have.
✔✔Salvage value is the amount that a - ✔✔salvage yard pays for the damaged vehicle
minus expenses, such as towing and storage.
✔✔How would you determine a car's pre-accident ACV and salvage value? - ✔✔A
claims rep can determine pre-accident ACV by using reference material such as that
provided by Kelley Blue Book or the National Automobile Dealers Association. The
claims rep must know the vehicle's make, model, year, and mileage, along with any
optional equipment, to correctly determine the ACV.
Salvage value can be determined by obtaining bids from various salvage dealers, either
through a salvage pool or a bid process.
, ✔✔Direct repair programs (DRPs) - ✔✔A program by which insurers provide a network
of repair facilities that meet the insurer's criteria for quality work at cost-effective prices.
✔✔Not all damaged parts need to be replaced in all circumstances; sometimes
damaged parts can be repaired. What factors do you think should be considered when
deciding whether to repair or replace a part? - ✔✔Generally, a part should be replaced
if repairs are not cost-effective or if they won't return the vehicle to its pre-loss condition.
Typically, if a part's repair cost exceeds a set percentage of its replacement cost (for
example, if the repair will cost more than 75 percent of the replacement cost), it may be
appropriate to replace the part. Plus, it may be more likely that repaired parts will be
misaligned or not function as well (or for as long) as new parts. These are all factors
that must be considered when appraising damage and repairs.
✔✔original equipment manufacturer (OEM) parts - ✔✔A new vehicle part that is made
by the vehicle's original equipment manufacturer.
✔✔Aftermarket (AM) parts - ✔✔A new vehicle part that is made by a manufacturer other
than the vehicle manufacturer.
✔✔Like kind and quality (LKQ) parts - ✔✔A vehicle part that is taken from a salvage
yard and that is of like kind and quality to the original part.
✔✔Why do you think claimants would be more likely to object to the use of AM and LKQ
parts? - ✔✔Claimants may be more likely to object to the use of AM and LKQ parts
because they may not last as long, may not come with a long warranty, and may
depreciate the car's value.
✔✔Actual total loss - ✔✔when repair is physically impossible (for example, if an auto is
stolen and not recovered)
✔✔Constructive total loss - ✔✔when the loss estimate equals or exceeds the auto's
actual cash value (ACV) less its salvage value
✔✔Greatview Insurance has a total loss threshold of 80 percent. An insured's Honda
Pilot sustains physical damage in an accident that will cost $9,000 to repair. The
vehicle's preaccident ACV was $15,000. Is the vehicle a total loss? - ✔✔No. The repair
costs equal 60 percent of the vehicle's ACV ($9,000 ÷ $15,000 = 0.60), which is lower
than the insurer's 80 percent total loss threshold. This means the vehicle is a partial
loss.
✔✔Three Hills Insurance uses a total loss formula. An insured's Jeep Wrangler
sustained physical damage in an accident that will cost $7,000 to repair. The vehicle's
salvage value is $2,500. The Jeep's preaccident ACV was $9,000. Is this vehicle a total
