Chapter 18 Personal Auto and Umbrella Liability Insurance

In addition to covering bodily injury and property damage liability, a typical personal umbrella policy also covers personal injury liability

True

No-fault benefits in most states are limited to medical expenses.

False. No-fault benefits in most states include rehabilitation expenses, loss of earnings, expenses for essential services, funeral expenses, and survivors' benefits, as well as medical expenses.

If Jim rented a car, damaged it, and was sued by the rental company, he would be covered under the liability coverage of his PAP for the property damage to the rental car.

False

If a client has $100,000/$300,000/$50,000 limits of liability in her PAP, she would be fully covered if sued for $150,000 for bodily injury and $20,000 for property damage by the driver of another car who is injured as a result of an auto accident that was the client's fault.

False

Medical payments coverage under the PAP applies only to persons other than the named insured.

False

Personal umbrella policies commonly cover situations excluded under the required underlying coverages, such as sexual molestation and failure to render professional services.

False

Subject to certain dollar limits, every PAP automatically covers transportation expenses, such as the costs of renting a car, while a covered auto is out of service because of a collision.

False . A PAP covers transportation expenses while a covered auto is out of service because of a collision only when the policy provides collision coverage on that covered auto.

Financial responsibility laws require owners of autos to carry liability insurance before a vehicle can be registered.

False. Compulsory insurance laws require owners of autos to carry liability insurance before a vehicle can be registered. Financial responsibility laws only require proof of future financial responsibility under certain circumstances.

Because of the highly competitive market, the cost of auto insurance differs little from company to company.

False. Despite the highly competitive market, the cost of auto insurance differs significantly from company to company in most states.

Uninsured and underinsured motorists coverages are unnecessary in states with compulsory liability laws.

False. Even in compulsory liability states, there are many uninsured and even unlicensed drivers. Also, many drivers carry only the limits required by law and thus are underinsured. Therefore, uninsured and underinsured motorists coverages are necessary even in states with compulsory liability laws.

If Hank hits a deer, the damage to his car would be paid under the collision coverage of his PAP.

False. If a client hits a deer, the damage to his car would be paid under the other-than-collision coverage.

Most states handle hard-to-insure drivers through joint underwriting associations.

False. Most states handle hard-to-insure drivers through automobile insurance plans.

Under most no-fault laws, the right to sue the negligent party, even for pain and suffering, has been eliminated.

False. Under most no-fault laws, the right to sue the negligent party exists once a dollar or verbal threshold has been met. No state has adopted a pure no-fault law.

A 25-year-old woman who lives with her parents is covered under her parents' PAP while she is driving the family car or a friend's car.

True

A client driving to Mexico should be advised to purchase liability coverage from a Mexican insurer.

True

Boatowners and yacht policies frequently contain warranties.

True

If Jim has an accident while driving his friend's car and is sued for $250,000 for bodily injury and property damage, the friend's liability insurance would pay first and Jim's liability coverage would be excess and thus pay only if needed.

True

If Ken has an umbrella policy with a $1 million limit and a $250 self-insured retention, and he is sued for $100,000 for an act covered under the umbrella policy but not under the required underlying coverages, the umbrella policy would pay all but $250 of the judgment.

True

If a client has a $300,000 single limit of liability in his PAP, he would be fully covered if sued for $150,000 for bodily injury and $20,000 for property damage as a result of an auto accident that was his fault.

True

In most states, clients' motorcycles and snowmobiles can be insured under a Personal Auto Policy (PAP) by endorsement.

True

In uninsured motorists coverage, uninsured motorists include drivers of hit-and-run vehicles.

True

The insurance company is obligated to pay an uninsured motorists claim only when the owner or operator of the uninsured vehicle is legally responsible for the insured's damages.

True

Two common package policies for boats are the boatowners policy for smaller boats and the yacht policy for larger boats

True