AINS 22 - Segment A
Which one of the following best defines premature death? A. A death that occurs before a person reaches his or her life expectancy B. A death that occurs before a person retires C. A death due to illness D. A death due to accident
A. A death that occurs before a person reaches his or her life expectancy
A policy excludes losses that result from the insured's carelessness. Which one of the following best explains the purpose for this exclusion? A. Assist in managing morale hazards B. Assist in keeping premiums reasonable C. Eliminate coverages requiring special treatment D. Reduce likelihood of coverage duplications
A. Assist in managing morale hazards
If Mary hits Betty in the arm, Mary has committed Select one: A. Battery. B. Slander. C. Assault. D. Trespass.
A. Battery.
An insurance policy states that the insured must cooperate with the insurer in any legal proceedings. This is an example of a policy: A. Condition. B. Definition. C. Insuring agreement. D. Declaration.
A. Condition.
In addition to primary rating factors, auto insurers may use additional rating factors that can reduce the cost of insurance to the policyholder. A credit for driver education is justified by regulators because Select one: A. Driver training can help reduce the frequency and severity of losses. B. Competition is increased by the availability of discounts. C. Inexperienced drivers must be charged higher rates. D. Children of existing policyholders are less likely to change insurers.
A. Driver training can help reduce the frequency and severity of losses.
An add-on plan adds no-fault benefits to auto insurance policies. A feature that distinguishes an add-on plan from a modified no-fault plan is that an add-on plan A. Places no restrictions on the injured person's right to sue a negligent party for economic or noneconomic damages. B. Restricts the right of the injured person to sue a negligent party for economic damages, but places no restrictions on the right to sue for noneconomic damages. C. Is subject to a monetary threshold. D. Is subject to a verbal threshold.
A. Places no restrictions on the injured person's right to sue a negligent party for economic or noneconomic damages.
Some specialty insurers provide auto insurance to high-risk drivers. The auto insurance policies from these specialty insurers generally have Select one: A. Premiums that are substantially higher than premiums charged in the standard market. B. Premiums that are subsidized by all insurers writing automobile insurance in the state according to an assessment representing their proportionate share of losses and expenses. C. Limits of insurance that are lower than the state's compulsory insurance laws. D. Collision insurance coverage with a low deductible when the vehicle has a loss payee.
A. Premiums that are substantially higher than premiums charged in the standard market.
Jared had a Personal Auto Policy (PAP) with a single limit of $100,000 for bodily injury and property damage liability. He was found to be at fault for an accident by a court and a $95,000 judgment was entered against him. In addition, prejudgment interest of $10,000 was awarded. Since entry of judgment, $1,000 in postjudgment interest has accrued. Jared earns $150 a day in salary and missed five days of work to attend the trial. His insurer spent $25,000 defending the lawsuit against Jared. Which one of the following is the total that should be paid by Jared's insurer under his PAP? Select one: A. $126,000 B. $126,750 C. $131,000 D. $131,750
B. $126,750
Which one of the following is considered real property? A. An automobile B. A brick storage shed C. Household appliances D. A motorhome
B. A brick storage shed
Which one of the following is considered real property? A. An automobile B. A house C. Furniture D. A motorhome
B. A house
A couple is expecting their first child and is considering the implications the premature death of the primary wage earner would have on the child's future. The primary wage earner's ability to provide income for this child is best described as A. A peril. B. An asset exposed to loss. C. A cause of loss. D. A financial consequence of loss.
B. An asset exposed to loss.
An intentional and unlawful threat of bodily harm is Select one: A. Battery. B. Assault. C. Slander. D. Nuisance.
B. Assault.
To determine the extent of coverage a policy provides, pre-loss policy analysis almost exclusively relies on Select one: A. Post-loss policy analysis. B. Scenario analysis. C. The DICE method. D. Coverage triggers.
B. Scenario analysis.
Liability split limits for a Personal Auto Policy (PAP) expressed as $300/$500/$100 mean limits of: A. $300 per person for bodily injury, $500 per accident for bodily injury, and $100 per accident for property damage. B. $300,000 per accident for bodily injury, $500,000 for property damage and bodily injury, and a $100,000 deductible. C. $300,000 per person for bodily injury, $500,000 per accident for bodily injury, and $100,000 per accident for property damage. D. $900,000 for all damages combined.
C. $300,000 per person for bodily injury, $500,000 per accident for bodily injury, and $100,000 per accident for property damage.
A couple meets with a financial adviser to review their insurance needs and investment choices. In the course of the discussion, a variety of topics are covered, including the impact of a long-term illness of the primary wage earner. In this context, the long-term illness is best described as: A. An uninsurable risk. B. An asset exposed to loss. C. A cause of loss. D. A financial consequence of loss.
C. A cause of loss.
Felipe purchases flame-retardant roofing for his house. Which one of the following steps in the risk management process is Felipe following? Select one: A. Examining the feasibility of risk management techniques B. Selecting appropriate risk management techniques C. Implementing the selected risk management techniques D. Analyzing loss exposures
C. Implementing the selected risk management techniques
An insured under a personal auto policy with liability limits of $100,000/$300,000/$25,000 is responsible for an auto accident that resulted in $90,000 in damages for bodily injury. The costs incurred by the insurer to defend the insured were $20,000. Which one of the following amounts did the insurer pay as a result of the accident? A. $20,000 B. $90,000 C. $100,000 D. $110,000
D. $110,000
The medical payments coverage in the Personal Auto Policy (PAP) applies to Select one: A. Anyone injured in an accident involving an insured. B. Any insured who is also covered by workers compensation for the same accident. C. Anyone occupying a car not owned by any insured but driven by an insured. D. Any person occupying a covered auto.
D. Any person occupying a covered auto.
In general, individuals and families should apply at least one risk financing technique and one risk A. Exposure technique. B. Transfer technique. C. Retention technique. D. Control technique.
D. Control technique.
In general, which one of the following is the most effective risk management technique for managing a family's property and liability loss exposures? Select one: A. Retention B. Avoidance C. Noninsurance risk transfer D. Insurance
D. Insurance
All of the following are usually analyzed as part of the DICE method of policy analysis, EXCEPT: Select one: A. Declarations B. Insuring agreement C. Exclusions D. Past loss experience
D. Past loss experience
All of the following items are examples of personal property, EXCEPT: A. Sports equipment B. Silverware C. A fishing boat D. Underground pipes
D. Underground pipes
An insured covers his owned auto with more than one Personal Auto Policy (PAP), each from a different insurer. In the event of a claim for medical payments coverage, Select one: A. Each insurer pays its pro rata share based on the proportion that its limit of liability bears to the total of applicable limits. B. The older insurance policy becomes primary and the newer insurance policy becomes excess. C. The first insurer to be placed on notice of the claim pays the entire claim. D. Each insurer pays equal shares.
A. Each insurer pays its pro rata share based on the proportion that its limit of liability bears to the total of applicable limits.
A family funds a retention program by maintaining a savings account for the purpose of paying for any losses that fall within the deductible of its homeowners policy. Which one of the following steps in the risk management process is the family following? Select one: A. Implementing selected risk management techniques B. Selecting appropriate risk management techniques C. Examining the feasibility of risk management techniques D. Analyzing loss exposures
A. Implementing selected risk management techniques
With respect to a nonowned vehicle, medical payments coverage under a Personal Auto Policy (PAP): A. Is excess over other collectible auto insurance that pays medical expenses. B. Is primary for medical and funeral expenses. C. Is shared on a pro rata basis. D. Are specifically excluded from coverage.
A. Is excess over other collectible auto insurance that pays medical expenses.
A temporary substitute auto under the Personal Auto Policy (PAP) Select one: A. Is treated the same as other nonowned autos for physical damage coverage. B. Is used as a long-term substitute for another covered auto. C. Cannot be covered for medical payments coverage. D. Cannot be covered for uninsured motorists coverage.
A. Is treated the same as other nonowned autos for physical damage coverage.
The major advantage of the tort liability system for compensation of auto accident victims is that Select one: A. It provides a remedy for victims of negligent or irresponsible drivers who cause accidents. B. It eliminates time delays in reaching a settlement. C. It is less costly than other alternative approaches. D. It does not allow punitive damage awards to be included as part of the compensation.
A. It provides a remedy for victims of negligent or irresponsible drivers who cause accidents.
In analyzing their loss exposures, the Jones family focuses on their losses over the past 10 years. They recall that family members were responsible for three auto accidents. They also recall that three years ago a thief broke into their home and stole cash, and last year a windstorm caused damage to their roof. Which one of the following loss characteristics is the Jones family primarily focusing on? A. Loss frequency B. Loss severity C. Total dollar losses D. Timing
A. Loss frequency
A family rents its vacation home to others for several months each year. A fire caused extensive damage to the home just before the rental season began one year, and the family was unable to collect any rent on the property until it was repaired. This inability to collect rent is an example of which one of the following outcomes of loss? A. Lost income B. Increased expenses C. Reduction in value of property D. Special damages
A. Lost income
Marcia has sustained serious injuries in an automobile accident with another driver. If the no-fault automobile insurance law in Marcia's state permits her to sue the other driver for economic damages only if her economic damages exceed her no-fault coverage limit, what type of no-fault law applies in Marcia's state? A. Modified no-fault B. Pure no-fault C. Add-on no-fault D. Personal injury protection
A. Modified no-fault
Keith commutes into the city in his car, and he provides a ride to two co-workers who live near him. Every other week, the co-workers take turns buying the gasoline for Keith's car. Does this activity create a public or livery conveyance situation that would preclude liability coverage under Keith's Personal Auto Policy (PAP)? A. No, because Keith is involved in a share-the-expense car pool. B. No, as long as Keith does not report the money for the gasoline as taxable income. C. Yes, coverage is excluded as long as Keith receives compensation from his co-workers in the form of gasoline expenses. D. Yes, coverage is excluded, but only while the co-workers are in the vehicle.
A. No, because Keith is involved in a share-the-expense car pool.
One of the most effective ways for the average family to mitigate the financial uncertainty associated with the premature death loss exposure is to A. Purchase life insurance. B. Participate in an individual retirement account (IRA). C. Purchase health and disability insurance. D. Participate in a 401(k) plan.
A. Purchase life insurance.
Marc and Kathi have a Personal Auto Policy (PAP). Their foster child Marie, who lives with them, just got her license. Which one of the following statements is correct with regard to Marie's PAP coverage? Select one: A. She is covered because Marie lives in the household. B. She is not covered because Marie is not related by blood. C. She is covered as long as Marie is an operator of a vehicle owned by Marc or Kathi. D. She is not covered since Marie has not been adopted by Marc and Kathi.
A. She is covered because Marie lives in the household.
Which one of the following statements regarding compulsory insurance laws is most accurate? A. Such laws provide incomplete protection due to low minimum requirements. B. All accident victims are guaranteed compensation. C. Accident victims are compensated immediately with no delay from the legal system. D. Such laws encourage careless driving and increase the number of automobile accidents.
A. Such laws provide incomplete protection due to low minimum requirements.
Technical words or phrases used in an insurance policy but not defined in the policy are given their Select one: A. Technical meanings. B. Legal meanings. C. Cultural meanings. D. Ordinary meanings.
A. Technical meanings.
Angela has a five-year-old pickup truck which she uses to commute from her ranch to her job at a feed store. She recently had a collision with another vehicle, after which both drivers required minor medical treatment. Angela lives in a modified no-fault state. Which one of the following is a primary rating factor in determining the premium for Angela's automobile insurance? A. The commuting use of the vehicle. B. The accident C. The vehicle is a truck D. Marsha lives in a no-fault state
A. The commuting use of the vehicle
The garage location shown on the Declarations page of a Personal Auto Policy (PAP) is Select one: A. The location where the auto is principally parked overnight. B. The mailing address of the insured's employer. C. Not used for rating purposes. D. A garage at a primary residence, not a driveway or street.
A. The location where the auto is principally parked overnight.
An owner of a car insured with a Personal Auto Policy (PAP) for which an insured selected and paid a premium for medical payments coverage Select one: A. Would not be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway. B. Would not be eligible for medical payments under the PAP if injured while driving a motorcycle but would be eligible for such coverage while riding as a passenger on a motorcycle. C. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on the insured's own property. D. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway.
A. Would not be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway.
Josh owns an auto service center. A customer dropped off a car for repair one morning and Josh agreed to drive the customer to the customer's office. Josh used his personal car insured by a Personal Auto Policy (PAP) to do this. While driving the customer to work, Josh got into an auto accident with another car in which the customer and the other driver were injured. Would Josh's PAP apply to this loss? A. Yes, under an exception to the garage business use exclusion. B. No, because the garage business use exclusion would apply. C. No, because the event does not qualify as an accident under the insuring agreement. D. Yes, under an exception to the other business use exclusion.
A. Yes, under an exception to the garage business use exclusion.
The Agreement and Definitions page of the Personal Auto Policy (PAP) includes Select one: A. The name of the insurer issuing the policy. B. A general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy. C. The name and mailing address of the insured. D. A general agreement stating the insurer's duty to pay damages and defense costs subject to the terms of the policy.
B. A general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy.
Jon is a 17-year-old driver with six speeding tickets and an at-fault accident. Jon has chosen insurance as his preferred method to meet the automobile financial responsibility law in his state. Jon's applications for insurance in the standard market have been declined. All of the following programs (if available in his state) would help Jon secure auto insurance, EXCEPT: Select one: A. A reinsurance facility B. A modified no-fault system C. An automobile insurance plan D. A specialized program in a voluntary market
B. A modified no-fault system
Which one of the following statements is accurate with regard to state automobile insurance plans? Select one: A. Most plans demand higher limits than those required by the state's financial responsibility laws. B. Applicants must show evidence that they have been denied auto liability insurance within a certain number of days. C. Applicants are eligible for coverage regardless of offenses committed or the number of violations of state or local laws. D. Premiums for liability coverage are usually comparable to those available in the standard market.
B. Applicants must show evidence that they have been denied auto liability insurance within a certain number of days.
Which one of the following is an exclusion to part A of the Personal Auto Policy (PAP)? Select one: A. Bodily injury to any family members using a covered auto B. Bodily injury to an insured's employee C. A prejudgement interest payment D. Any organization responsible for the acts of a person using a covered auto
B. Bodily injury to an insured's employee
All of the following are steps in the risk management process, EXCEPT: A. Identify loss exposures B. Combine loss exposures C. Examine the feasibility of risk management techniques D. Implement the selected risk management techniques
B. Combine loss exposures
For liability, medical payments, and uninsured motorists under the Personal Auto Policy (PAP), a replacement auto is Select one: A. Not covered for more the fourteen days unless the insured asks for the coverage. B. Covered for the remainder of the policy period, even if the insured does not ask for coverage. C. Not covered without prompt notice to the insurer. D. Covered for the remainder of the policy period in addition to the physical damage coverage.
B. Covered for the remainder of the policy period, even if the insured does not ask for coverage.
Joshua is a claim representative who has been assigned an auto liability claim. To determine whether his company's Personal Auto Policy (PAP) provides coverage for the claim, Joshua should first review the policy's: A. Insuring Agreement. B. Declarations. C. Exclusions. D. Conditions.
B. Declarations.
A family invests in both stocks and bonds. This is an example of Select one: A. Separation. B. Diversification. C. Duplication. D. Avoidance.
B. Diversification.
The Part B—Medical Payments Coverage of the Personal Auto Policy (PAP) contains an Other Insurance provision. If two automobile policies from different insurers cover the same owned vehicle A. The policy with the lower limit of liability is excess. B. Each insurer pays its pro rata share. C. The first insurer to receive notice of the claim becomes primarily liable. D. The policy with the lower limit of liability is primary.
B. Each insurer pays its pro rata share.
In a state with a modified no-fault plan, how will the insurance companies pay the bodily injury expenses resulting from an automobile accident between two unrelated drivers insured with the required no-fault coverage? Select one: A. Each insurer will pay for the other driver's damages. B. Each insurer will pay for its own policyholder's damages. C. The insurers must determine which driver was greater than 50% at fault. The insurer of that driver will compensate both parties. D. The insurers must determine the percentage to which each driver was at fault. The insurers will compensate each driver based on those percentages.
B. Each insurer will pay for its own policyholder's damages.
Insurance score as a rating factor for an individual auto insurance applicant is based on which one of the following? Select one: A. Loss history B. Financial history C. Territory demographics D. Income data
B. Financial history
A family suffered extensive fire damage to its home and was temporarily unable to inhabit it. The family was forced to rent a hotel room while its home was under repair. The cost incurred to rent the hotel room is referred to as which one of the following outcomes of loss? Select one: A. Lost income B. Increased expenses C. Reduction in value of property D. Special damages
B. Increased expenses
Which one of the following statements is true regarding no-fault automobile insurance? Select one: A. Under a no-fault system, an injured person does not need to establish fault, but must prove negligence in order to collect payment for damages. B. Most no-fault laws apply only to bodily injury and not to property damage. C. No-fault laws typically provide no benefits for loss of earnings for an injured person. D. An injured party must sue to obtain medical expenses above a particular monetary threshold in all no-fault plans.
B. Most no-fault laws apply only to bodily injury and not to property damage.
In the auto insurance policy definitions, an eligible private passenger auto, pickup, or van of which the named insured becomes the owner during the policy period is a Select one: A. Temporary substitute vehicle. B. Newly acquired auto. C. Replacement auto. D. Trailer.
B. Newly acquired auto.
Helen was staying at the vacation house of her friend, Grace. One night, Helen decided to go out for snacks. She wanted to borrow Grace's car, but Grace was asleep. Grace had told Helen earlier not to use the car without first obtaining Grace's permission, but Helen figured that the car was not being used anyway, so she should be able to use it. She found Grace's keys and drove the car to a convenience store. Along the way, she caused an accident and a liability claim was made against her. Is there coverage for this claim under Grace's Personal Auto Policy (PAP)? A. Yes, because Helen's belief that she should be able to use the car was reasonable. B. No, because Helen's sense of entitlement was not reasonable. C. Yes, because for insurance purposes, it is assumed that an insured has permission to use a friend's car. D. No, because Helen intentionally borrowed the car.
B. No, because Helen's sense of entitlement was not reasonable.
Which one of the following sections of the Personal Auto Policy (PAP) would provide coverage for medical costs and loss of wages when the insured is injured by a hit-and-run driver? Select one: A. Part D—Coverage for Damage to Your Auto B. Part C—Uninsured Motorists Coverage C. Part B—Medical Payments Coverage D. Part A—Liability Coverage
B. Part C—Uninsured Motorists Coverage
Regulators usually approve the use of auto insurance rating categories such as "standard," which results in normal premiums, and "nonstandard," which results in higher premiums, because Select one: A. They allow the application of discounts and credits. B. Policyholders receive equitable treatment based on the loss exposure they represent. C. The overall cost of insurance is usually reduced for the consumer. D. Competition among insurers requires them to discriminate high-risk exposures from average exposures.
B. Policyholders receive equitable treatment based on the loss exposure they represent.
The definitions section of the Personal Auto Policy (PAP) uses Select one: A. Legal terminology to help insureds understand how to file claims under the policy. B. Simple-to-understand language to define important words and phrases that are used throughout the policy. C. Technical language to explain insurance terminology to individuals who do not work in the industry. D. Complicated language to define important words and phrases that are used throughout the policy.
B. Simple-to-understand language to define important words and phrases that are used throughout the policy.
Which one of the following is a form of social insurance used by families and individuals to mitigate the financial uncertainty associated with their retirement loss exposures? Select one: A. Unemployment compensation B. Social Security C. 401(k) plans D. Individual retirement accounts (IRAs)
B. Social Security
A Web designer breaks three fingers and is unable to type until her fingers heal one month later. However, she is able to continue to work on various Web-design concepts. This is an example of Select one: A. Temporary total disability. B. Temporary partial disability. C. Permanent total disability. D. Permanent partial disability.
B. Temporary partial disability.
All of the following could lead to a liability loss for a family, EXCEPT: Select one: A. A guest slips on an icy sidewalk in front of the family's home and breaks his leg. B. The father trips on a broom he left lying in the driveway and breaks his arm. C. The daughter, who is 16 years old, sideswipes a neighbor's car and dents its fender while driving her own car. D. The son, who is 13 years old, throws a rock at a classmate who requires stitches for an injury to his head.
B. The father trips on a broom he left lying in the driveway and breaks his arm.
If a motorist incurs the cost to repair his vehicle after a collision, this result is best described as: A. An asset exposed to loss. B. The financial consequence of loss. C. A cause of loss. D. A peril.
B. The financial consequence of loss.
The Schedule of Coverages indicates the coverage and limits that apply to each listed auto, along with Select one: A. Each auto and trailer's rating class. B. The premium for each coverage. C. The primary location of an insured auto. D. Each auto and trailer specifically listed.
B. The premium for each coverage.
Which one of the following statements is true regarding public or livery conveyances and the liability coverage provided under the Personal Auto Policy (PAP)? A. Liability insurance applies to an insured's ownership or operation of the vehicle while it is being used as a public or livery conveyance. B. The public or livery conveyance exclusion applies when a conveyance is indiscriminately offered to the public. C. The public or livery conveyance exclusion applies to share-the-expense car pools. D. The public or livery conveyance exclusion eliminates coverage for ordinary business use of a car.
B. The public or livery conveyance exclusion applies when a conveyance is indiscriminately offered to the public.
Insurers and other organizations that make insurance available to those who are unable to obtain coverage from the standard market are collectively called Select one: A. A reinsurance facility. B. The residual market. C. The secondary market. D. An automobile insurance plan.
B. The residual market.
The inadvertent assumption of a loss exposure that has not been identified or accurately analyzed is known as Select one: A. Diversification. B. Unplanned retention. C. Risk transfer. D. Avoidance.
B. Unplanned retention.
Most households choose risk management techniques by Select one: A. Analyzing loss timing. B. Using financial criteria. C. Analyzing loss control requirements. D. Using nonfinancial criteria.
B. Using financial criteria.
Which one of the following best describes a pure no-fault system? Select one: A. A person retains full rights to sue a negligent party for injuries. B. A person retains full rights to pursue an uninsured motorists claim. C. A person seeks compensation for injuries from his or her own policy and cannot seek damages from a negligent party. D. A person's right to seek damages for injuries from a negligent party is limited, but not eliminated.
C. A person seeks compensation for injuries from his or her own policy and cannot seek damages from a negligent party.
Underemployment occurs when Select one: A. A person loses his job. B. A person's unemployment is voluntary. C. A person's work hours are reduced. D. An employee is terminated for performance-related reasons.
C. A person's work hours are reduced.
In a state with a reinsurance facility for high-risk drivers, a private insurer that does not want to bear the risk of a high-risk applicant may Select one: A. Assign the application to the reinsurance facility to be underwritten and serviced. B. Accept and service the policy, but collect excess losses from the reinsurance facility. C. Assign the premium and losses to the reinsurance facility, and continue to service the policy. D. Accept the application, but assign servicing and losses to members of the reinsurance facility pool on a proportional basis.
C. Assign the premium and losses to the reinsurance facility, and continue to service the policy.
In general, a loss prevention measure is implemented to Select one: A. Spread loss exposures over numerous projects or products. B. Reduce loss severity. C. Break the sequence of events that leads to a loss. D. Keep backup information and assets in reserve.
C. Break the sequence of events that leads to a loss.
In the context of assets exposed to loss, elements such as fire, wind, hail, and theft are best described as examples of A. Real property exposures. B. Personal property exposures. C. Causes of loss. D. Consequences of property losses.
C. Causes of loss.
In the context of assets exposed to loss, long-term illness and loss of employment are best described as examples of A. Real property exposures. B. Personal property exposures. C. Causes of loss. D. Consequences of loss.
C. Causes of loss.
Which one of the following indicates persons or organizations, such as a loss payee, that have additional coverage interests under an insurance policy? Select one: A. Conditions B. Insuring agreements C. Declarations D. Definitions
C. Declarations
Which one of the following is an expense payable under the Part B—Medical Payments Coverage of the Personal Auto Policy (PAP)? A. Lost wages B. General damages C. Funeral expenses D. Cost of bail bonds
C. Funeral expenses
Unsatisfied judgment funds are funds established in some states to compensate auto accident victims who Select one: A. Sustain bodily injury caused by an uninsured motorist and obtain compensation from their own uninsured motorist coverage. B. Are injured by a negligent driver who has liability insurance at the time of the accident. C. Have obtained a court judgment that is uncollectible because the guilty party cannot pay. D. Are injured at work and able to collect workers compensation.
C. Have obtained a court judgment that is uncollectible because the guilty party cannot pay.
Stu is a high school student. Stu and three of his friends decided on a car-pool arrangement to get to school instead of taking the bus. Stu would drive his mom's car, and each friend would chip in towards gas. Stu did not inform his parents of his plans. While driving to school on the first day of the car-pool arrangement, Stu and his passengers saw a science teacher who had recently given Stu a low grade. In an attempt at revenge, Stu drove his mom's car into the teacher's car, causing moderate damage to both vehicles. The teacher pressed charges and also made a property damage claim against Stu, who turned the claim over to the family's Personal Auto Policy (PAP) insurer. The insurer denied coverage based on an exclusion in the PAP. Which one of the following exclusions applies to this incident? A. Vehicle used without reasonable belief of being entitled B. Vehicles owned by or available for family member's regular use C. Intentional injury D. Public or livery conveyance
C. Intentional injury
For most insureds, the primary source of information for generating scenarios for pre-loss policy analysis is Select one: A. The DICE method. B. An analysis of common policy exclusions. C. Past loss experience. D. An analysis of common policy insuring agreements.
C. Past loss experience.
Having a theoretically infinite number of possible loss scenarios is one of the limitations of Select one: A. Post-loss policy analysis. B. The DICE method. C. Pre-loss policy analysis. D. Determining the amount payable for a claim.
C. Pre-loss policy analysis.
Auto insurance protects against Select one: A. Property and premature death loss exposures. B. Property loss exposures only. C. Property and liability loss exposures. D. Liability loss exposures only.
C. Property and liability loss exposures.
Which one of the following is a component of the Personal Auto Policy (PAP) declarations page? Select one: A. Duties after an accident B. Provisions for cancellation of the policy C. Rating information D. Agreement and definitions
C. Rating information
Which one of the following statements is true regarding automobile insurance rating? Select one: A. State regulators require that all insurers offer discounts on auto rates for passive restraints. B. Most insurers base automobile rates on primary rating factors and do not consider any other factors in establishing rates. C. State regulators require that rates be adequate, reasonable, and not unfairly discriminatory. D. Drivers with lower-than-average loss exposure are charged higher rates.
C. State regulators require that rates be adequate, reasonable, and not unfairly discriminatory.
The Insuring Agreement in Part A—Liability Coverage of the Personal Auto Policy (PAP) addresses all of the following categories, EXCEPT: Select one: A. Persons and organizations insured B. Defense costs covered C. Supplementary payments D. Damages covered
C. Supplementary payments
Which one of the following is the primary risk to financial assets for a retiree? Select one: A. That the retiree will lose regular employment income B. That the retiree will lose employer-provided benefits C. That the assets allocated for retirement will be insufficient D. That the retiree will die prematurely
C. That the assets allocated for retirement will be insufficient
After using the DICE method to determine whether a claim is covered by a policy, the next step is for the insurer to determine Select one: A. The scenario under which the loss occurred. B. Whether the post-lost duties of the insured affect coverage. C. The amount payable. D. Whether the loss occurred within the coverage territory.
C. The amount payable.
Sixteen-year-old Helen and her family were staying at a motel while on vacation. One night, Helen decided that she wanted to go out for snacks. She wished to borrow her parents' car, but her parents had gone to bed early. Helen was not sure whether her parents would mind her using their car, but she figured that the car was not being used anyway, so she should be able to use it. She found the keys and drove the car to a convenience store. Along the way, she caused an accident and a liability claim was made against her. Is there coverage for this claim under her parents' Personal Auto Policy (PAP)? A. Yes, because no one explicitly told Helen that she could not use the car. B. No, because Helen's sense of entitlement was not reasonable. C. Yes, because for insurance purposes, it is assumed that a family member has permission to use another family member's car. D. No, because Helen intentionally borrowed the car.
C. Yes, because for insurance purposes, it is assumed that a family member has permission to use another family member's car.
All of the following items are examples of personal property, EXCEPT: A. A diamond wedding ring B. A set of cookware C. A fishing boat D. A detached garage
D. A detached garage
Bo was injured in an auto accident while using his car as a taxicab. Bo's car is covered by a Personal Auto Policy (PAP) that included medical payments coverage. Which one of the following statements about Bo's coverage for the accident is correct? Select one: A. Bo will receive medical payments under the PAP under the Public or Livery Conveyance coverage provision. B. Bo will receive medical payments under the PAP under the Vehicles Used in the Business of an Insured coverage provision. C. Bo will not receive medical payments under the PAP because of the Taxi and Omnibus exclusion. D. Bo will not receive medical payments under the PAP because of the Public or Livery Conveyance exclusion.
D. Bo will not receive medical payments under the PAP because of the Public or Livery Conveyance exclusion.
Regarding the Personal Auto Policy (PAP), which one of the following includes details on coverage related to state-specific laws and regulations? Select one: A. Agreements and Definitions B. Part F—General Provisions C. Declarations D. Endorsements
D. Endorsements
In evaluating the effectiveness of financial responsibility laws in providing protection against irresponsible drivers, critics point out that they may provide inadequate indemnification for injuries because Select one: A. The costs of auto accidents are increasing too rapidly for the financial responsibility laws to keep pace. B. The insurance companies providing insurance that meet financial compensation laws are unable to compensate accident victims in a timely manner. C. The legal system is continually eroding the effectiveness of the financial compensation laws by generating compensation for minor injuries. D. Financial responsibility laws require only minimum amounts of financial responsibility, which might not fully compensate the injured person.
D. Financial responsibility laws require only minimum amounts of financial responsibility, which might not fully compensate the injured person.
Jean lent her van to a church member, Lindsey, who was transporting a group of teenagers to a church sponsored picnic. While on the way to the picnic, the van overturned, injuring one of the teenagers. The parent of the injured teenager has sued Jean, Lindsey, and the church for the teenager's injuries and future disability. Who is insured for liability under the Jean's Personal Auto Policy (PAP) for this accident? A. Jean only B. Jean and Lindsey only C. Lindsey and the church only D. Jean, Lindsey, and the church
D. Jean, Lindsey, and the church
Joel is a delivery driver for XYZ Auto Supply. He usually drives the company van, but one day, since he only had to deliver a small part, Joel used his own car that is insured with a Personal Auto Policy (PAP). While doing so, Joel was involved in a two-vehicle accident and a liability claim was made against Joel and XYZ Auto Supply. Which one of the following is an insured(s) under Joel's PAP in this situation? Select one: A. None B. Joel only C. XYZ Auto Supply only D. Joel and XYZ Auto Supply
D. Joel and XYZ Auto Supply
An individual's liability losses A. May not exceed the value of his or her real property. B. May not exceed the value of all of his or her assets, including both personal and real property. C. May not exceed the amount of his or her current income. D. May consume most of his or her present assets and future income.
D. May consume most of his or her present assets and future income.
A person, corporation, partnership, or other entity identified as an insured party in a Personal Auto Policy (PAP) Declarations page is known as the Select one: A. Additional insured. B. Producer. C. Insurer. D. Named insured.
D. Named insured.
The Definitions section of the Personal Auto Policy (PAP) defines several words and phrases. Which one of the following words is used in connection with Part B—Medical Payments Coverage and Part C—Uninsured Motorists Coverage, clarifying the coverages provided? Select one: A. Trailer B. Property damage C. Leased Vehicles D. Occupying
D. Occupying
Within the Personal Auto Policy (PAP), the name of a lender, loss payee, or lienholder is usually shown Select one: A. On the schedule of coverages. B. In the definitions section. C. In the insuring agreement. D. On the Declarations page.
D. On the Declarations page.
Homeowners insurance protects against Select one: A. Property loss exposures only. B. Property and premature death loss exposures. C. Liability loss exposures only. D. Property and liability loss exposures.
D. Property and liability loss exposures.
Which one of the following is a disadvantage of uninsured motorists coverage? Select one: A. The victim must prove that he or she has no other source of compensation before coverage applies. B. Uninsured motorists coverage does not cover damages resulting from a hit-and-run accident. C. Uninsured motorists coverage is not mandatory in any states. D. Property damage is excluded in many states.
D. Property damage is excluded in many states.
The declarations page of a Personal Auto Policy (PAP) Select one: A. Identifies common policy definitions. B. Lists any exclusions that are attached to the policy. C. Indicates that the policy period starts at 12:01 PM standard time at the address of the insurer. D. Shows the name of the insured and the insured's mailing address.
D. Shows the name of the insured and the insured's mailing address.
All of the following are a type of asset exposed to loss due to health and disability loss exposures, EXCEPT: Select one: A. Employment income B. Savings C. Employer-provided benefits D. Social Security income
D. Social Security income
Organizations use a wide variety of methods, including loss control surveys, to identify their property and liability loss exposures. By contrast, individuals and families tend to rely on some or all of the following, EXCEPT: Select one: A. Friends B. Family members C. Their insurance agent or broker D. Their investment advisor
D. Their investment advisor
