Personal Auto Insurance

Mr. Jones has an auto policy with Coverage A limits of 15/30/10. He also has a $250 deductible for collisions. He runs a red light at an intersection and collides with Mrs. James' car. Mrs. James is awarded $30,000 for her injuries and $6,000 for the damage to her car. Mr. Jones' car sustains $750 in damage. How much will Mr. Jones' policy pay for this incident? A) $21,500.00 B) $21,750.00 C) $36,750.00 D) $36,500.00

The correct answer was - A: $21,500.00 Explanation: The amount of coverage for Mrs. James' injuries is limited to $15,000. The damage to her car, $6,000, is covered in full because it is within the $10,000 property damage limit. The damage to Mr. Jones' car is also covered, after his deductible of $250 is applied. Therefore, the total payment is $21,500.

In which of the following areas would PAP coverage typically NOT extend? A) Hawaii. B) Mexico. C) Canada. D) Puerto Rico.

The correct answer was - B: Mexico. Explanation: PAP coverage applies to occurrences that take place within the United States, its territories and possessions (including Puerto Rico,) and Canada. The PAP generally does not provide coverage for vehicles operated in Mexico (although some insurers offer coverage for vehicles operating a short distance within the Mexican border).

An auto policy would provide coverage for an auto driven in all of the following places EXCEPT: A) Mexico City, Mexico. B) Paducah, Kentucky. C) Alberta, Canada. D) Honolulu, Hawaii.

...The correct answer was - A: Mexico City, Mexico. Explanation: The personal auto policy applies only to losses, accidents, or occurrences that take place within the United States, its territories and possessions, or Canada, or while being transported between ports in any of those places. Coverage for losses in Mexico usually must be purchased from Mexican insurers. However, some insurers provide coverage for vehicles from the United States operating within a certain distance inside the Mexican border, such as 100 miles. Many states require some limited insurance for physical damage in Mexico.

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? A) No, a written endorsement by the insurer is the only way to change the policy. B) Yes, the insured has the ability to change the policy at the time of the application. C) No, the agent has to make this request in writing. D) Yes, as long as the request is done in writing.

...The correct answer was - A: No, a written endorsement by the insurer is the only way to change the policy. Explanation: 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. The insured cannot make changes to the policy because this is a contract of adhesion and is either accepted or rejected by the applicant.

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) Phillipsburg, St. Martin. B) Dover, Delaware. C) Alberta, Canada. D) San Juan, Puerto Rico.

...The correct answer was - A: Phillipsburg, St. Martin. Explanation: The personal auto policy provides coverage within the United States, its territories and possessions, Puerto Rico, and Canada. St. Martin is in the Dutch West Indies.

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? A) Three. B) Five. C) One. D) Two.

...The correct answer was - A: Three. Explanation: Under Part B--Medical Payments Coverage, the insurer pays for reasonable expenses for necessary medical and funeral services incurred within three years from the date of an accident without regard to fault.

The 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.

...The correct answer was - A: any additional auto acquired in the past 30 days. Explanation: An additional auto acquired during the policy period is considered a covered auto. However, some restrictions do apply. For example, 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.

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

...The correct answer was - A: cost of a fan belt replaced at the scene of a breakdown. Explanation: Parts are not covered under this coverage. The labor and service call costs are covered up to the limit of liability.

The commercial 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) freezing. B) earthquake. C) theft. D) flood.

...The correct answer was - A: freezing. Explanation: 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.

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

...The correct answer was - A: overturning of the auto. Explanation: Comprehensive coverage pays for loss to a covered auto or its equipment for any cause except collision, overturn, or upset.

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

...The correct answer was - A: pickup with a gross vehicle weight of 15,000 pounds. Explanation: A pickup or van is eligible as long as it does not exceed 10,000 pounds gross vehicle weight. An additional requirement is that the pickup or van is not used to deliver persons or property for a fee.

Personal auto liability insurance provides coverage in all of the following situations EXCEPT when: A) the insured uses the auto as a taxi. B) a relative living in the same household as the insured takes the auto without permission. C) the insured's 12-year-old child takes the auto for a joy ride. D) the insured accepts money for using the auto in a car pool.

...The correct answer was - A: the insured uses the auto as a taxi. Explanation: When an insured uses his auto as a taxi, this is considered livery and is not covered under a PAP. However, if the insured accepts a small amount of money as part of a car pool, the insured is covered. This is considered to be a sharing of expenses rather than livery.

How much will the personal auto policy pay for a rental car if the insured vehicle is stolen? A) $30 per day, up to $900 maximum. B) $20 per day, up to $600 maximum. C) $25 per day, up to $650 maximum. D) Nothing.

...The correct answer was - B: $20 per day, up to $600 maximum. Explanation: The PAP provides that if an insured's vehicle is stolen, and he has comprehensive insurance, the insurance company will pay $20 per day up to a maximum of $600 for a rental car. This coverage starts 48 hours after the theft.

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? A) Medical payments. B) Collision. C) Liability. D) Comprehensive.

...The correct answer was - B: Collision. Explanation: 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).

If a vehicle is insured for collision, this coverage waives the deductible. What is this coverage? A) UIM. B) UMPD. C) Supplementary payments. D) Other than collision.

...The correct answer was - B: UMPD. Explanation: Some states require insurers to offer uninsured motorist property damage (UMPD). It covers the physical damage to a car caused in an accident qualifying under uninsured motorist. If the insured has collision coverage, the UMPD acts as the collision deductible. The insured is then relieved from paying the deductible.

The law that provides that each party must accept responsibility for his own losses and must recover losses from his own insurer is the: A) tort law. B) no-fault law. C) fault law. D) self-coverage law.

...The correct answer was - B: no-fault law. Explanation: No-fault laws attempt to remove as many liability cases from the courts by providing that each party accept responsibility for his own losses and recover any damages for these losses directly from his own insurer. These no-fault laws often restrict the amount of recovery for such losses and may prohibit any recovery from the insurer for certain losses, such as pain and suffering.

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): A) owned automobile. B) nonowned automobile. C) uninsured automobile. D) temporary substitute automobile.

...The correct answer was - B: nonowned automobile. Explanation: A nonowned auto is one that may be driven by the insured, but he does not own it. The owner gives permission to the insured to use the vehicle.

If a dispute arises over whether an insured is entitled to uninsured motorists coverage, what process is used to settle the dispute? A) Appraisal. B) Subrogation. C) Arbitration. D) Negotiation.

...The correct answer was - C: Arbitration. Explanation: 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 damages is covered Under Part D-Coverage for Damage to the Insured's Auto? A) Mechanical breakdown not resulting from total theft. B) Wear and tear. C) Flood. D) Freezing.

...The correct answer was - C: Flood. Explanation: Part D-Coverage for Damage to the Insured's Auto provides other than collision (comprehensive) coverage and collision coverage. Other than collision coverage protects against almost all accidental damage, with the exception of coverage provided under collision, including fire, theft, explosion, earthquake, windstorm, missiles, falling objects, hail, water, flood, vandalism and malicious mischief, riot and civil commotion, glass breakage, and collision with birds or animals, wild or domestic. Damage from wear and tear, freezing and mechanical breakdown, and electrical breakdown (unless resulting from total theft of the auto) are excluded. Road damage to tires is also excluded.

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 add to the company commercial auto policy to make sure he has the proper coverage? A) Additional insured. B) Drive other car coverage. C) Individual named insured. D) Employees as insureds.

...The correct answer was - C: Individual named insured. Explanation: The individual named insured endorsement provides the insured's family members with liability coverage as a named insured. Permission from the company to drive a company vehicle is not needed. Jim can now allow others to drive the company vehicle.

Part A of the personal auto policy would apply in which of the following situations? A) Driver using the insured vehicle to transport people for a fee. 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 who intentionally causes an accident.

...The correct answer was - 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. Explanation: Family members are insureds under the personal auto policy regardless of their age. There are specific exclusions relating to livery use, intentional acts and use of owned autos by people in the automobile business.

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? A) It is not covered; Cecil must cancel the existing policy and purchase a new one for the replacement vehicle. B) It is automatically covered for 14 days, but Cecil must notify the insurer for coverage to continue beyond that point. C) It is automatically covered. D) It is not covered until Cecil notifies the insurance company.

...The correct answer was - C: It is automatically covered. Explanation: The PAP provides coverage for newly acquired vehicles. How coverage applies depends on the coverage and whether the vehicle is a replacement for an already insured vehicle or an additional auto. For liability, medical payments, and uninsured motorists coverage, a replacement vehicle automatically has the broadest coverage provided for any vehicle already listed in the Declarations. Notification of the insurer is not required.

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 over. Maggie is severely injured and taken to the hospital. What coverage will reimburse Maggie for her medical bills? A) Liability coverage. B) Bodily injury coverage. C) Medical payments coverage. D) Uninsured motorist coverage.

...The correct answer was - C: Medical payments coverage. Explanation: Medical payments coverage pays reasonable expenses for necessary medical services. Covered persons include the insured and any family member while in the insured vehicle.

What type of endorsement would be used to insure a recreational vehicle under the personal auto policy? A) Motor home endorsement. B) Extended vehicle endorsement. C) Miscellaneous type vehicle endorsement. D) Joint ownership coverage.

...The correct answer was - C: Miscellaneous type vehicle endorsement. Explanation: The miscellaneous type vehicle endorsement to the PAP covers recreational vehicles as well as motorcycles, motor homes, all-terrain vehicles (ATVs), dune buggies, and similar vehicles that otherwise are excluded by the policy.

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) The vehicle is stolen before the tow truck can tow it to the body shop. B) The vehicle is towed to the body shop. C) The front windshield is shattered. D) Mary's luggage in the trunk is destroyed.

...The correct answer was - C: The front windshield is shattered. Explanation: 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.

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

...The correct answer was - C: collision. Explanation: Comprehensive coverage, also known as other than collision coverage, insures against almost all accidental damage, with the exception of coverage provided under collision.

Howard bought a car yesterday for his youngest son to drive to school and his job. Under Howard's automobile policy, this car is considered a (n): A) uninsured automobile. B) temporary substitute automobile. C) owned automobile. D) nonowned automobile.

...The correct answer was - C: owned automobile. Explanation: A newly acquired automobile is an owned automobile that must be an eligible vehicle. For any coverage except coverage for damage to your auto, this car will have the broadest coverage provided for any of the cars listed on the declarations until it is added to the policy. It must be insured within 14 days after the insured becomes the owner.

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 not covered for this accident because he used the car without permission. B) Bobby is covered by his parents' policy because he is included in the definition of named insured. 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.

...The correct answer was - D: Bobby is covered by his parents' policy because he is a family member. Explanation: Bobby is a family member and thus automatically covered under this family's PAP policy. Even though Bobby is using the car without permission, the exclusion pertaining to nonpermissive users does not apply to use of an owned auto by resident family members.

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? A) Unsatisfied judgment law. B) Compulsory insurance law. C) Tort law. D) Financial responsibility law.

...The correct answer was - D: Financial responsibility law. Explanation: The financial responsibility law in each state requires proof of financial responsibility if in an accident. Failure to provide proof may result in loss of license and/or vehicle registration. 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.

While driving to work one morning, Jessica is hit from behind by a car driven by Sam. Jessica is injured and taken to the hospital where she 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 Jessica for her injuries? A) The state's unsatisfied judgment coverage. B) Sam's uninsured motorist bodily injury coverage. C) Jessica's bodily injury liability coverage. D) Jessica's uninsured motorist bodily injury coverage.

...The correct answer was - D: Jessica's uninsured motorist bodily injury coverage. Explanation: This coverage pays for bodily injury damages that the insured would be legally entitled to recover from the operator of an uninsured auto.

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) Insured is legally entitled to damages. B) Other vehicle meets policy's definition of uninsured vehicle. C) Loss is sustained by an insured. D) Loss involves property damage to insured's auto.

...The correct answer was - D: Loss involves property damage to insured's auto. Explanation: Under the standard personal auto policy, Part C applies only to bodily injury losses.

Jane insures her car with ABC Insurers. Which of the following individuals best describes a family member on Jane's policy? A) Robert, her ex-husband who moved out last week. B) Renee, a friend, who lives with Jane. C) Uncle Joe visiting from Texas. D) Maggie, her older sister, who lives with Jane.

...The correct answer was - D: Maggie, her older sister, who lives with Jane. Explanation: A family member is someone related to the named insured by blood, marriage, or adoption, who is a resident of the insured's household. Since Maggie is Jane's sister and is a resident of Jane's household, she would best fit the description of a family member under the policy.

Which one of the following auto policy coverages would pay for damage to the insured's car that the insured motorist caused by hitting a farmer's cattle while driving through the country? A) Collision. B) Liability. C) Uninsured Motorists. D) Other than Collision.

...The correct answer was - D: Other than Collision. Explanation: Other than collision coverage, also known as comprehensive coverage, protects against almost all accidental damage, with the exception of coverage provided under collision. Coverage includes losses due to fire, theft, explosion, earthquake, windstorm, missiles, falling objects, hail, water, flood, vandalism and malicious mischief, riot and civil commotion, glass breakage, and collision with birds or animals, wild or domestic.

Richard and his wife own two 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 can add the company car to his automobile policy as car number 3. B) Richard can add the drive other car endorsement to his policy. C) Richard has to rely on the coverage his company gives him and follow their usage rules. D) Richard can add the extended nonowned coverage for named individual endorsement to his policy.

...The correct answer was - D: Richard can add the extended nonowned coverage for named individual endorsement to his policy. Explanation: The extended nonowned endorsement is used to extend the drive other car coverage of the policy to include coverage for a vehicle furnished regularly to the insured. Coverage applies to the individual named in the endorsement and a separate premium is required.

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? A) Retention. B) Other insurance. C) Arbitration. D) Subrogation.

...The correct answer was - D: Subrogation. Explanation: When a company pays the insured for a loss for which some person other than the insured is responsible, the insurer has the right to recover its loss from the negligent party. The insured must reimburse or hold in trust for the insurer any recovered damages the insured collects after the insurer has made payment.

If a California resident with a personal auto policy with the minimum liability limits has an accident in a state that requires higher limits, which of the following will occur? A) The insured must first purchase an other states coverage endorsement. B) The policy will provide the higher limits, but the insured must first pay the additional premium. C) The loss is not covered. D) The policy will automatically provide the required higher limits at no extra charge.

...The correct answer was - D: The policy will automatically provide the required higher limits at no extra charge. Explanation: If the covered auto is used in another state where coverage limits are required by a financial responsibility law and those limits are higher than the limits of the insured's PAP, the insurer will interpret the policy to provide the higher limits required by the law.

Medical payments coverage is Part B in the personal automobile policy. All of the following statements about medical payments coverage are true EXCEPT: A) if other auto medical insurance applies when driving a nonowned vehicle, this policy is excess. B) amounts paid under this coverage are reduced by amounts paid for medical expenses under bodily injury or uninsured motorist coverages. C) it does not cover bodily injury while using an insured vehicle as a residence. D) if other auto medical insurance applies when driving an owned vehicle, this policy is excess.

...The correct answer was - D: if other auto medical insurance applies when driving an owned vehicle, this policy is excess. Explanation: If other auto medical payments insurance applies, this policy's share is proportionate to all limits of liability. In a nonowned car, this policy is excess over any other medical payments insurance.

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 insured's daughter's friend. C) the insured's daughter. D) the occupant of the car struck by the insured.

...The correct answer was - D: the occupant of the car struck by the insured. Explanation: 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.

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. C) The insurance company will not cover the auto repairs or injuries. D) The insurance company will only cover the auto repairs.

The correct answer was - A: The insurance company will cover the auto repairs and injuries. Explanation: PAP provides no coverage if the insured is paid a fee for providing a livery service, such as transporting people or property in a taxi or a limousine. A car pool, however, is not considered livery use, but rather sharing expenses. An accident that occurs while driving a car pool will be covered by the insured's PAP.

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

The correct answer was - B: collision. Explanation: Collision coverage provides only physical damage coverage for the insured's vehicle. It protects against damage done to the covered auto by impact with another vehicle or an object. It also covers damage sustained if the car rolls over (is upset).