Unit 8: Personal Auto Insurance

The insured has an auto policy with liability limits of 30/60/10. He negligently runs off the road and causes $70,000 damage to an apartment building. How much will the policy pay for the damage to the building?

$10,000

Which of the following statements is TRUE regarding the termination provision? A) The insurer must provide written notice to the insured for policy cancellation or non-renewal. B) The insurer may only cancel the policy at renewal. C) The insured may only cancel the policy at renewal. D) The insurer may cancel or non-renew an auto policy at any time during the term of the policy.

A) The insurer must provide written notice to the insured for policy cancellation or non-renewal.

An automobile insurance plan for drivers with poor driving records is also known as

A) an assigned risk plan

Which dispute method takes place when the insured and insurance company cannot agree on the amount to be paid by the uninsured or underinsured motorist coverage?

Arbitration

If the insured hits a deer while driving his own vehicle, which part of the personal auto policy will pay to repair the vehicle? A) Medical payments. B) Other than collision. C) Liability. D) Collision.

B) Other than collision.

Mary was involved in an accident with a hit-and-run driver. The car was damaged. Mary must comply with all of the following duties EXCEPT A) calling the police B) following the hit-and-run driver to get a valid identification C) protecting the car against further damage D) permitting the insurer to inspect the damaged car

B) following the hit-and-run driver to get a valid identification

Which of the following autos owned by the named insured could NOT be covered under the personal auto policy for losses occurring from physical damage or liability? A) A pick-up truck used on the insured's farm. B) A sedan that the insured's licensed children drive on occasion. C) A station wagon used to make deliveries for the insured's small business. D) A small trailer designed to be pulled behind by a car.

C) A station wagon used to make deliveries for the insured's small business. An auto used for business purposes cannot be covered under a personal auto policy.

While driving down the street, an insured swerves to avoid a pedestrian, goes over a curb, and damages a neighbor's fence. Which of the following will pay for the repairs to the fence? A) The driver's general liability policy B) The driver's automobile policy under the collision provisions C) The driver's automobile policy under the property damage liability provisions D) The insured's homeowners policy

C) The driver's automobile policy under the property damage liability provisions Property damage liability provides coverage for the responsibility of compensating another person for lost use or destruction or damage to that person's tangible property. This coverage is included in most personal and commercial liability policies along with bodily and personal injury coverages.

All of the following vehicles can be insured under an unendorsed personal auto policy EXCEPT A) trailers hitched to the insured vehicle B) newly acquired vehicles C) motorcycles D) rental cars

C) motorcycles The miscellaneous type vehicle endorsement to the PAP covers motorcycles, motor homes, all-terrain vehicles, dune buggies, and other types of vehicles that are otherwise excluded by the policy.

Howard borrows his neighbor's car because his son took his car to college for a week while moving into the dorm. Under Howard's automobile policy, his neighbor's car is considered a (n):

C) nonowned automobile. A nonowned auto is one that may be driven by the insured, but he does not own it.

Two personal auto policies cover one vehicle. Company A's limit of liability is $100,000 and Company B's limit of liability is $300,000. How much will Company A pay for a liability loss in the event of an accident when the damages total $100,000?

D) $25,000.00

Which of the following damages is covered Under Part D - Coverage for Damage to the insured's auto? A) Mechanical breakdown not resulting from total theft B) Freezing C) Wear and tear D) Flood

D) Flood

Jim borrows a company van to take his son to college. As the trip takes more than 10 hours, he would like to share the drive with Julia, his wife. What endorsement should Jim ass to the company commercial auto policy to make sure he has the proper coverage?

Individual named insured. The individual named insured endorsement provides the insured's family members with liability coverage as a named insured.

Cecil sells his car and buys another one to replace it. How does the liability coverage in his personal auto policy apply to the replacement vehicle?

It is automatically covered.

While driving to work one morning, Joe is hit from behind by a car driven by Sam. Joe is injured and taken to the hospital where he is admitted with a broken shoulder and other internal injuries. During the police investigation, it is determined that Sam was 100% negligent and did not have automobile insurance. What coverage will indemnify Joe for his injuries?

Joe's uninsured motorist bodily injury coverage

Jane's sister, Maggie, who lives with Jane and just sold her car, drives Jane's sports car to a party. On the way home Maggie loses control of the car, hits a parked car, and rolls the car. Maggie dies as a result of her injuries. What coverage will reimburse Jane for Maggie's funeral expenses?

Medical payments coverage.

Which of the following personal auto policy endorsements may be issued to someone who does not own a vehicle but drives rented autos?

Named non-owner coverage endorsement

Steve meets with his agent to apply for an automobile insurance policy on his 2 personal cars. In reviewing the policy, Steve finds he is not willing to accept the duties listed in the conditions section. He signs the application but adds a note deleting the duties to the insurer. Is this acceptable to the company?

No, a written endorsement by the insurer is the only way to change the policy. In the general provisions section of the policy, the changes section stipulates that a written endorsement by the insurer that forms part of the policy is the only way to change the policy.

Monica uses her car for her skin-care business. One night, she drives the car to meet a friend at a restaurant. While driving home, Monica loses control of the car, hits a parked car, and rolls the car over. Monica is severely injured and taken to the hospital. Will medical payments coverage reimburse Monica for her medical bills?

No, there is no coverage for injuries while occupying a vehicle used for the insured's business.

Which of the following terms states that the company will pay only its share of a loss that is also covered by other insurance?

Other insurance

If a vehicle collides with a boulder that came tumbling down the side of a mountain, what coverage would pay for the damage?

Other than Collision

What part of the personal auto policy covers losses caused by malicious mischief, vandalism, hail, or floods?

Other than Collision

During a storm, a tree branch fell on Tina's car and broke the windshield. Which coverage of her personal auto policy will cover the damage to the car?

Other than Collision coverage of Part D. Damage caused by a falling object and breakage of glass are considered Other than Collision losses under Part D of the personal auto policy.

While driving to work, Leonard is eating his breakfast, reviewing his appointment book, and talking on his cell phone. He runs a red light and collides with a commuter van. The van's occupants are hospitalized. Which part of Leonard's personal auto policy covers the occupants' injuries and damage to the van?

Part A

Which of the following coverages pays the difference between the insured's actual damages for bodily injury and the amount of liability insurance that the insured could collect from an at-fault driver?

Underinsured motorist coverage

An insured has to testify in court at the insurance company's request. What is the amount of reimbursement that the insured can receive for loss of earnings due to the time spent in court?

Up to $250 a day

Tim and Michelle were both injured when they were struck by a car while walking across the street. The driver, who could not be identified, left the scene of the accident. Would this loss be covered under Tim and Michelle's personal auto policy?

Yes, it would be covered under Part C - uninsured motorist coverage. A car operated by a hit-and-run driver is considered an uninsured motor vehicle.

The personal auto policy considers a newly acquired car to be

a covered auto A new car is considered a covered automobile at purchase but must be added to the policy within 14 days to continue coverage.

Under Part D of the personal auto policy, a temporary substitute auto is considered

a non-owned auto.

Matt has just been non-renewed by his auto insurance company because he has 3 speeding tickets and 2 at-fault accidents in the last 9 months. Matt will most likely need to obtain insurance from

an assigned risk plan

Participating insurance companies have agreed to share the risk of insuring individuals with poor driving records. This voluntary agreement is called

an assigned risk plan

Jeffrey bought a car yesterday for his daughter to drive to school and her job. Under Jeffrey's automobile policy, this car is considered

an owned automobile. A newly acquired automobile is an owned automobile that must be an eligible vehicle.

If the insured's policy pays for bodily injury (BI) or property damage (PD) caused by an uninsured motorist, the insurance company has the right to sue the uninsured motorist for the damages it paid. This is also known as

subrogation

The personal auto policy uses the words you and your in the declarations. This is referring to

the named insured and resident spouse.

How much will the personal auto policy pay for a rental car if the insured vehicle is stolen?

$20 per day, up to $600 maximum

Julia purchases a new car for her daughter. How many days does she have to add it to her policy?

14

Heather decided that she wants to have a second car to drive in the winter. She buys a new car and automatically has the same auto coverage as her other car. How many days does Heather have to notify the insurance company if she wants her coverage on her new car to continue?

14 days

Part B covers reasonable expenses for necessary medical and funeral services incurred within how many years of the date of injury, regardless of fault?

3

A covered auto is defined in the policy as all of the following EXCEPT A) any additional auto acquired in the past 30 days B) any auto shown in the declarations C) any auto used as a temporary substitute while an insured auto is being repaired D) any trailer owned by the insured or spouse

A) any additional auto acquired in the past 30 days If the newly acquired auto is in addition to any vehicle shown on the declarations, it must be insured within 14 days of the purchase date. If it replaces one of the cars, the insured does not need to add it during that policy period.

Automobile comprehensive coverage insures all of the following perils EXCEPT A) collision B) theft C) glass breakage D) fire

A) collision Comprehensive coverage, also known as Other than Collision coverage, insures against almost all accidental damage, with the exception of coverage provided under collision.

Howard borrows his neighbor's car because his car is in the body shop after his oldest son had an accident on a trip home from college. Under Howard's automobile policy, his neighbor's car is considered a (n): A) temporary substitute automobile. B) nonowned automobile. C) uninsured automobile. D) owned automobile.

A) temporary substitute automobile.

Physical damage losses under the personal auto policy are reimbursed on what basis?

Actual cash value or cost to repair or replace, whichever is less

If a dispute arises over whether an insured is entitled to uninsured motorists coverage, what process is used to settle this dispute?

Arbitration Part C of the PAP contains an arbitration provision, which may be used to settle disputes involving whether the insured is entitled to coverage or the amount of damages.

Which of the following terms means bodily harm, sickness, or disease, including death?

Bodily injury

Which of the following individuals would not be covered under Coverage B - medical payments coverage? A) The named insured who was driving the car B) The family members of the named insured C) Passengers in the car that the named insured hit in a collision D) Passengers in the named insured's car

C) Passengers in the car that the named insured hit in a collision

The personal auto policy coverage applies to losses, accidents, or occurrences that take place during the policy period in all the following locations EXCEPT A) Alberta, Canada B) Dover, Delaware C) Philipsburg, St. Martin D) San Juan, Puerto Rico

C) Philipsburg, St. Martin

What is a no-stacking rule?

C) Prevents the insured or injured person from collecting medical payments from more than one policy or coverage, such as uninsured motorist.

Which of the following would be covered under collision coverage? A) Colliding with a deer on the highway B) A tree fell on the vehicle C) The vehicle slid on ice and hit a tree D) A windshield damaged in a hail storm

C) The vehicle slid on ice and hit a tree

While backing her car into a parking space on a neighborhood street, Melanie struck a fire hydrant with her bumper. Which coverage under Melanie's personal auto policy (PAP) will cover the damage to the bumper?

Collision Part D of the PAP covers damage sustained by the insured auto after impact with another vehicle, impact with an object, or upset (rolling the vehicle over).

Every state requires that each person be able to prove he is financially prepared if involved in an accident. Suppose your state requires minimum liability limits of 25/50/10. What is the name of that law?

Financial responsibility law. Each state requires a minimum limit, such as 25/50/10, or $25,000 bodily injury per person, $50,000 bodily injury per accident, and $10,000 property damage per accident.

All states have financial responsibility laws that require each driver to prove that he can pay for bodily injury or property damage liability losses arising out of auto accidents. These are also known as

Financial responsibility laws An important provision under Part A of the personal auto policy deals with financial responsibility laws. A driver normally meets this requirement by purchasing an auto insurance policy with limits of liability that meet the limits required by that state's laws.

What type of endorsement would be used to insure a recreational vehicle under the personal auto policy?

Miscellaneous type vehicle endorsement.

Michael loses control of his car and hits a parked car. Which coverage of Michael's personal auto policy will pay for the damage to the parked car?

Part A. Since Michael was responsible for this loss, it is covered under his liability coverage. Part D would cover the insured's car.

Lee was injured when she lost control of her car and hit a guardrail. Which part of her personal auto policy will cover her medical expenses?

Part B. Medical payments coverage provides coverage to the named insured's family members, and passengers in the named insured's auto.

Mary was involved in an accident with another driver. The car was damaged. Her insurance company reimburses her for the damage and seeks recovery from the negligent driver. What is this process called?

Subrogation

An insured rents a car while on vacation in Canada and causes an accident. What coverage is provided for this loss under the personal auto policy?

The loss is covered under an unendorsed policy.

In addition to collision and Other than Collision coverage, Part D provides coverage for up to $20 a day, with a maximum of $600, for

transportation expenses for collision

Lisa is injured by a hit-and-run driver while driving her car on a work-related errand. Assuming she carries a $100,000 limit for uninsured motorist coverage, how much of the $125,000 in medical expenses would Lisa be paid under her personal auto policy?

$0. An insurer will not pay for any part of a loss that could be covered under workers' compensation law. If Lisa was driving her car and this same accident occurred while she was not working, the loss would be paid. $100,000 would be paid for bodily injury per person.

Under an auto policy, Other than Collision coverage would apply to which of the following situations? A) All of the car's tires are stolen. B) An insured has her car parked at an airport, and a suitcase is stolen from the car. C) The car rolls over after hitting a patch of ice. D) An insured breaks a window to gain access because the keys were left inside.

A) All of the car's tires are stolen. Other than Collision coverage protect against all accidental damage not due to collision, upset, and other specified exclusions.

Which of the following would NOT be paid as supplementary payments under Part A of the personal auto policy? A) Funeral expenses for the insured B) Expenses the insurer incurs in investigating claims C) The insured's lost earnings up to $200 per day because of court appearances D) Interest accruing after a judgment is entered which was defended by the insurer

A) Funeral expenses for the insured Funeral expenses for the insured would be paid by Part B - Medical Payments coverage of the PAP

Which one of the following would be considered a temporary substitute vehicle under the terms of the personal auto policy? A) Loaner vehicle provided by an auto repair shop B) Company car provided by an employer C) Truck borrowed from a friend while moving D) New car purchased by the insured 3 days ago

A) Loaner vehicle provided by an auto repair shop

Roberta shares carpool expenses with co-workers. During her turn driving to work, she is involved in an accident in which one of her passengers is injured and her car is damaged. How does her personal auto policy respond? A) The insurance company will cover the auto repairs and injuries. B) The insurance company will not cover the auto repairs or injuries. C) The insurance company will only cover the auto repairs. D) The insurance company will not cover the auto repairs.

A) The insurance company will cover the auto repairs and injuries.

Which of the following statements regarding uninsured motorist coverage is NOT correct? A) It pays the difference between in insured's actual damages and the amount the insured was able to collect. B) It is mandatory in all states. C) This coverage indemnifies the insured for bodily injury and property damage. D) This minimum financial responsibility limit imposed by most states often falls short of fully reimbursing the insured for a loss.

B) It is mandatory in all states.

Jonathan and Marry have 2 sons. Steve lives at home and the other son, Stan, lives in an apartment across town. Jonathan wants to buy a car for Stan so he can get a job after his college classes. Jonathan titles the car in both his name and Stan'd name and wants to add the car to his automobile policy. Which endorsement will provide this coverage?

B) Joint ownership coverage

Which of the following is NOT one of the requirements for a loss to be paid under the uninsured motorists coverage of the personal auto policy? A) Other vehicle meets policy's definition of uninsured vehicle B) Loss involves property damage to insured's auto C) Loss is sustained by an insured D) Insured is legally entitled to damages

B) Loss involves property damage to insured's auto Under the standard personal auto policy, Part C applies only to bodily injury losses.

All of the following statements regarding Part D - coverage for damage to your auto are correct EXCEPT A) This coverage pays for direct and indirect loss to the named insured's rental or borrowed cars B) This coverage covers all personal property in the vehicle. C) This coverage pays for direct and indirect loss to the named insured's covered auto. D) This coverage is commonly known as physical damage coverage.

B) This coverage covers all personal property in the vehicle. Part D coverage for damage to your auto covers loss caused against collision and other than collision. It does not cover any personal property in the vehicle.

All of the following vehicles are eligible for coverage under the PAP EXCEPT A) a private-passenger auto B) a pickup with a gross vehicle weight of 15,000 lbs C) a four-wheel drive SUV D) a minivan with a 7,500 gross vehicle weight

B) a pickup with a gross vehicle weight of 15,000 lbs A pickup or van is eligible as long as it does not exceed 10,000 lbs gross vehicle weight.

Craig was driving his family in his owned station wagon on vacation in Wisconsin when a deer ran out in the road and collided with the front end of the wagon. Craig had the car towed to the nearest town, where the only car repair shop told him that it would take at least a week to get the parts to repair the engine. Craig's automobile policy provides coverage for transportation expenses. All of the following statements about transportation expenses are correct EXCEPT: A) the maximum coverage is $600. B) coverage starts 48 hours after a car is damaged by an other than collision loss. C) there is a $20 per-day limit for expenses. D) no deductible applies.

B) coverage starts 48 hours after a car is damaged by an other than collision loss. With a theft loss, coverage is provided for substitute transportation beginning 48 hours after the theft. For all other covered collision or Other than Collision losses, coverage begins 24 hours after the loss.

Comprehensive coverage pays for all of the following damages EXCEPT A) glass breakage B) overturning of the auto C) explosion D) hitting a deer

B) overturning of the auto Comprehensive coverage pays for loss to a covered auto or its equipment for any cause except collision, overturn, or upset.

The insured rear-ends another vehicle that is stopped at a red light. The driver of the car struck by the insured is badly injured. The insured, his daughter and her friend were in the car and were also injured. Part B of the insured's personal auto policy will pay medical expenses for all of the following EXCEPT: A) the insured. B) the occupant of the car struck by the insured. C) the insured's daughter's friend. D) the insured's daughter.

B) the occupant of the car struck by the insured. Part B of the personal automobile policy (PAP) provides coverage for medical payments incurred in an auto accident without regard to fault. Covered persons include the insured, family members, and any passengers in the insured's vehicle. It does not provide liability coverage for injuries sustained by passengers in another auto involved in an accident with the insured.

Which of the following is considered a uninsured/underinsured motor vehicle? A) A dune buggy used off-road B) Car owned by the state insurance department C) Car insured for less than the limits required by the state D) Car furnished by an employer to an aunt living in the insured's household

C) Car insured for less than the limits required by the state

Part A of the personal auto policy would apply in which of the following situations? A) Driver who intentionally causes an accident. B) Garage mechanic while test-driving the insured's auto. C) Insured's 13-year-old son who, while playing with the car, starts it and lets it roll into the street, damaging other parked cars. D) Driver using the insured vehicle to transport people for a fee.

C) Insured's 13-year-old son who, while playing with the car, starts it and lets it roll into the street, damaging other parked cars. Family members are insureds under the PAP, regardless of their age.

Medical Payments Coverage is Part B in the personal automobile policy. All of the following statements about medical payments coverage are correct EXCEPT A) coverage is provided for the named insured if hit by a car while walking along a road B) no coverage is available if the vehicle is being used as a residence C) Part B covers reasonable expenses for services incurred within 5 years of the date of injury D) coverage is available if an injury occurs while getting into or out of a vehicle

C) Part B covers reasonable expenses for services incurred within 5 years of the date of injury

The term occupying means all of the following EXCEPT A) in a vehicle B) upon a vehicle C) owning a vehicle D) getting into, onto, out of, or off of a vehicle

C) owning a vehicle

Which of the following is considered a collision loss? A) An automobile is swept away in flood waters. B) A bird flies into the windshield of an auto. C) An automobile is stolen from a parking lot. D) An automobile flips over an embankment onto its side.

D) An automobile flips over an embankment onto its side.

Bobby, age 16, borrows his parents' car without their permission and gets into an accident. Which of the following statements about coverage under the parents' personal auto policy is CORRECT? A) Bobby is covered by his parents' policy because he is included in the definition of named insured. B) Bobby is not covered for this accident because he used the car without permission. C) Bobby is not covered because it was not his car. D) Bobby is covered by his parents' policy because he is a family member.

D) Bobby is covered by his parents' policy because he is a family member. Bobby is a family member and thus automatically covered under this family's PAP policy.

Which of the following losses would NOT be excluded under Coverage A of the personal auto policy? A) Bill uses his car as a taxi-cab on the weekends. One evening, he hit a parked car while pulling in a driveway to pick up a passenger. B) Out of anger and intentionally, Julia rear ends her brother's car causing damage to the bumper. C) Justin hits a pedestrian after running a red light with his motorcycle. D) Denise's 16-year-old son hits a parked car while on his way to school to pick up his siblings.

D) Denise's 16-year-old son hits a parked car while on his way to school to pick up his siblings.

Richard and his wife own 2 family cars. In addition, Richard is given a company car to makes sales calls. He occasionally uses the company car for personal use and is concerned that he may not have sufficient company coverage. Which of the following is the best advice his agent can give him? A) Richard has to rely on the coverage his company gives him and follow their usage rules. B) Richard can add the company car to his automobile policy as car #3. C) Richard can add the drive other car endorsement to his policy. D) Richard can add the extended non-owned coverage for named individual endorsement to his policy.

D) Richard can add the extended non-owned coverage for named individual endorsement to his policy. Extended non-owned endorsement is used to extend the drive other car coverage policy to include coverage for a vehicle furnished regularly to the insured. A separate premium is required.

Mary was involved in an accident with a hit-and-run driver. Her car was damaged. Which of the following items would be covered under the collision coverage in the personal auto policy? A) Mary's luggage in the trunk is destroyed B) The vehicle is towed to the body shop C) The vehicle is stolen before the tow truck can tow It to the body shop D) The front windshield is shattered

D) The front windshield is shattered Although glass breakage is covered under comprehensive coverage, if collision causes the breakage, the insured may elect to have it included in the collision coverage.

Under the medical payments coverage of a personal auto policy, the insurer pays for medical expenses and funeral services incurred within how many years from the date of an accident?

D) Three. Under Part B - Medical Payments Coverage, the insurer pays for reasonable expenses for necessary medical and funeral services incurred within 3 years from the date of an accident without regard to fault.

A personal auto policy provides coverage for all for the following drivers of an insured car EXCEPT A) the insured's spouse B) a neighbor who uses the car with insured's permission C) the insured's child who attends school in another state D) a thief who steals the car

D) a thief who steals the car

Depending on the circumstances, a passenger injured in an automobile accident may be able to recover under all of the following coverages EXCEPT: A) liability. B) medical payments. C) uninsured motorist. D) collision.

D) collision.

All of the following statements about Part A liability coverage are correct EXCEPT A) the supplementary payments section is automatically included for no additional premium B) defense costs are paid in addition to the limit of insurance C) the duty of the insurer to settle or defend ends when the limit of liability has been exhausted D) damage to property owned and being transported by the insured is covered

D) damage to property owned and being transported by the insured is covered (liability covers the "other guy" not the insured)

All of the following are excluded under collision or Other than Collision coverages EXCEPT A) damage due to wear and tear B) road damage to tires C) damage to awnings, cabanas, or other equipment D) flood damage

D) flood damage Flood damage to a vehicle is not excluded under the Other than Collision coverage.

The personal auto policy offers physical damage coverage. One of the coverages is comprehensive. All of the following causes of loss are specifically covered under comprehensive EXCEPT A) flood B) theft C) earthquake D) freezing

D) freezing Freezing is specifically excluded under comprehensive coverage. Other exclusions include nuclear explosion, radiation, war, racing, wear and tear, and blowout, punctures, or other road damage to tires.

All of the following statements about the term COVERED AUTO are correct EXCEPT A) private passenger autos under 10,000 lbs and with 4 wheels are considered covered autos B) if a neighbor borrows your car with permission, your policy covers any at-fault damages up to the policy limits C) any trailer owned by the named insured is considered a covered auto D) personal auto insurance follows the driver, not the vehicle

D) personal auto insurance follows the driver, not the vehicle (Insurance follows the vehicle, not the driver)

Towing and labor coverage covers all the following EXCEPT A) labor for changing a tire at the scene of a breakdown B) towing costs after an accident C) towing costs after a breakdown D) the cost of a fan belt replaced at the scene of a breakdown

D) the cost of a fan belt replaced at the scene of a breakdown

The personal auto policy covers both property and liability coverages. Which of the following covers property coverage?

Part D. (Part A- liability coverage Part B- medical payments coverage Part C- uninsured motorist coverage Part D- coverage for damage to your auto (physical damage))

If a California resident with a personal auto policy with the minimum liability limits has an accident in a state that requires higher limits, what will happen?

The policy will automatically provide the required higher limits at no extra charge.

In automobile insurance, the term supplementary payments refers to payments

covering reasonable expenses incurred at the insurer's request and other specified expenses that are not subject to the policy limit

According to the out-of-state coverage provision in a personal auto policy, while temporarily driving in another state, the insurer will pay

the higher amount of the insureds liability policy limit or the state's minimum liability requirements.