Chapter 14 practice quiz
13. Which of the followings limits is best described as 150/300/50? a. Bodily injury: $150,000 each person, $300,000 each accident; Property damage: $50,000 each accident b. Bodily injury: $150,000 each person; Property damage: $300,000 each accident, $50,000 each property c. Property damage: $150,000 each property, $300,000 each accident; Bodily injury: $50,000 each person d. Bodily injury: $50,000 each person; Property damage: $150,000 each accident; Limit: $300,000 each accident e. Bodily injury; $300,000 each person; Property damage: $50,000 each property, $150,000 each accident
ANS: a
22. This market is created by state law and exists to provide auto insurance to people who cannot buy it through the usual channels. Identify this market. a. Residual market b. Unshared market c. Reinsurance market d. Substandard market e. Voluntary market
ANS: a
5. Identify the law that acts to induce motorists to buy auto liability insurance so victims of their negligence will receive compensation. a. Financial responsibility law b. Tort law c. Pure no-fault law d. Modified no-fault law e. Compulsory auto liability insurance law
ANS: a
8. This market is created by state law and exists to provide auto insurance to people who cannot buy it through the usual channels. Identify this market. a. Residual market b. Unshared market c. Reinsurance market d. Substandard market e. Voluntary market
ANS: a
NARRBEGIN: SCENARIO 2 Al E. Gender momentarily took his eyes off the road while driving his car insured under a Personal Auto Policy, including liability (25/50/20), medical payments (5000), collision and comprehensive and uninsured/underinsured motorist coverages. Al's car struck a properly parked car owned by Anita McCue. Anita was injured and required $5,000 in medical care. Anita's car was damaged to the tune of $3,000. Al's car suffered $2000 in damage. NARREND 20. What coverage under Al's Personal Auto Policy will pay for damage to Al's auto? a. physical damage (Part D) b. uninsured motorist (Part C) c. liability (Part A) d. medical payments (Part B)
ANS: a
11. All events resulting in automobile liability are: a. excluded unless specifically included. b. covered unless specifically excluded. c. on a named-perils basis. d. settled by the insurer without the approval of the insured. e. paid by the insurer even after the limit of liability is crossed.
ANS: b
14. Assume that you have limits of 15/25/15 ($15,000/$25,000/$15,000), the minimum required in the state where your car is garaged. If you are driving in a state that requires 25/50/20 ($25,000/$50,000/$20,000) and are involved in an accident, your insurer will interpret your policy as if it had the higher limits. Thus, even though you have to meet only the requirements where you live, your policy will provide the limits you need in any state or province in which you may be driving. Identify the provision in your automobile insurance policy that makes this possible. a. Indemnification b. Stacking c. Out-of-state d. Redlining e. Gentrification
ANS: b
19. Assume that you have limits of 15/25/15 ($15,000/$25,000/$15,000), the minimum required in the state where your car is garaged. If you are driving in a state that requires 25/50/20 ($25,000/$50,000/$20,000) and are involved in an accident, your insurer will interpret your policy as if it had the higher limits. Thus, even though you have to meet only the requirements where you live, your policy will provide the limits you need in any state or province in which you may be driving. Identify the provision in your automobile insurance policy that makes this possible. a. Indemnification b. Stacking c. Out-of-state d. Redlining e. Gentrification
ANS: b
23. When his Lexus lost control and rolled into his garage, David was happy he had full coverage on his home and automobile. The car is a total loss as well as the garage and the other car, RAV4, in the garage. What did he get from each policy? a. Full coverage under part A of the PAP and Parts A and C of HO-3 for both cars and the garage and its content. b. Full coverage under part C of the PAP for the cars and from the HO-3 Parts A and C for the garage and its content c. Full coverage under part D of the PAP for the cars and from the HO-3 Parts A and C for the garage and its content c. Full coverage under part A of the PAP for the garage and its content and part E for the cars
ANS: b
4. Auto plans that offer compensation to an injured motorist through the individual's own insurer are called: a. verbal threshold plans. b. add-on plans. c. modified no-fault plans. d. pure no-fault plans. e. monetary threshold plans.
ANS: b
NAR: SCENARIO 2 21. Which of the following statements is true about no-fault laws? a. Under these laws, benefits are provided by insurers with regard to who caused the accident. b. Under this concept, first-party benefits such as PIP are provided with regard to fault as a way to encourage legal battles. c. According to this concept, in a multi-car accident, each injured party would receive compensation from his or her own insurance company. d. Under this concept, it would be mandatory to expend resources in determining fault. e. These laws are uniform.
ANS: b
NARRBEGIN: SCENARIO 1 Lilly owns a RAV4 and her friend Jill owns a Honda Accord. Lilly has coverage from State Farm and Jill from Allstate. Both of them have exactly the same coverages and use the PAP. They have a single liability limit of $350,000 and the same limit for uninsured motorist. They have a $500 deductible for collision and a $200 deductible for other-than-collision. They have towing and labor and car rental reimbursement. NARREND 17. Lilly borrowed Jill's Honda when her RAV4 was in the shop in response to recalls. While driving the Honda, she was seriously injured by an uninsured drunk driver. The Honda was a total loss. How much will be paid by each policy if it is determined that Lilly has $670,000 of bodily injury loss? Whose insurance company pays first and whose insurance company pays second? What amount is covered by each insurer for all the damage in this case? Find the justification for the coverages in the PAP. a. Lilly's insurance (State farm) pays under coverage A $350,000 and Jill's (Allstate) is adding the extra of $320,00 plus the car loss b. Coverage C - uninsured motorist is paying here from Lilly first $350,000 and second from Jill, $320,000 plus the car loss c. Uninsured motorist (coverage C) under Jill coverage will pay first $350,000 and what is left of 320,000 plus the damaged car loss is under Lilly's coverage from State Farm d. Because the drunk driver had no coverage nothing is paid
ANS: b
1. Which of the following statements is true about no-fault laws? a. Under these laws, benefits are provided by insurers with regard to who caused the accident. b. Under this concept, first-party benefits such as PIP are provided with regard to fault as a way to encourage legal battles. c. According to this concept, in a multi-car accident, each injured party would receive compensation from his or her own insurance company. d. Under this concept, it would be mandatory to expend resources in determining fault. e. These laws are uniform.
ANS: c
10. In states that have _____, all automobile insurers in the state are members and the association is, in effect, an insurance industry company. a. unsatisfied judgment plans b. reinsurance facility c. auto insurance plans d. joint underwriting association e. modified no-fault laws
ANS: d
15. Identify the coverage that fills in the coverage gap that arises when the negligent party meets the financial responsibility law of the state, but the auto accident victim has losses in excess of the negligent driver's liability limit. a. Stacking coverage b. Supplementary motorist coverage c. Nonfortuitous coverage d. Underinsured motorist coverage e. Uninsured motorist coverage
ANS: d
16. Under a modified no-fault law what conditions need to be met before a lawsuit can be brought? a. injuries must be serious b. damages exceed a threshold c. no insurance must exist d. a & b e. a & c
ANS: d
2. Identify the category of no-fault law that exists only theoretically and would abolish completely the opportunity to litigate over automobile accidents. a. Add-on no-fault b. Modified no-fault c. Threshold no-fault d. Pure no-fault e. Tort no-fault
ANS: d
12. In an automobile insurance policy, the only limit of liability that you are concerned with in this case is the aggregate limit. Once all losses equal this limit, you will have to bear the burden of any further liability. Identify this limit of liability. a. Double limit of liability b. Split limit of liability c. Tort limit of liability d. Multiple limit of liability e. Single limit of liability
ANS: e
3. In states that adopted modified no-fault laws, there are two types of modification. The _____ threshold describes the types of injuries for which the party at fault is considered liable, as in Florida, Michigan, New Jersey, New York, and Pennsylvania. 1. pure 2. affirmative 3. monetary 4. add-on 5. verbal
ANS: e
6. Many states have funds to provide compensation in situations when an injured motorist obtains a judgment against the party at fault but cannot collect because the party has neither insurance nor resources. Identify these funds. a. Financial responsibility fund b. Title defect fund c. No-fault fund d. Monetary threshold fund e. Unsatisfied judgment fund
ANS: e
7. Identify the law that requires automobile registrants to have specified liability insurance in effect at all times. a. Financial responsibility law b. Tort law c. Pure no-fault law d. Modified no-fault law e. Compulsory auto liability insurance law
ANS: e
9. According to these plans, if a company writes 10 percent of the auto insurance business in the state, it has to accept 10 percent of the qualified applicants. Identify these plans. a. Financial responsibility plans b. Affirmative plans c. Unsatisfied judgment plans d. Add-on plans e. Auto insurance plans
ANS: e
NAR: SCENARIO 1 18. In states that adopted modified no-fault laws, there are two types of modification. The _____ threshold describes the types of injuries for which the party at fault is considered liable, as in Florida, Michigan, New Jersey, New York, and Pennsylvania. a. pure b. affirmative c. monetary d. add-on e. verbal
ANS: e
