Auto Insurance

Ann has an automobile insured for $3,000 on a stated amount basis. The automobile is totally destroyed by an insured peril and valued at $3,500 at the time of loss. The policy will pay: A.) $3,000 B.) $2,500 C.) $2,700 D.) $2,400

A.) $3,000 Question Rationale The valued contract is written for a stated amount, which is agreed upon at the time of application. When the auto is damaged, this is the amount that will be used to value the loss. This avoids the difficulty of trying to determine the value of the auto after it has been damaged or destroyed.

The limits for BI or PD on a liability insurance policy A.) Are used to pay for the claimant's compensatory damages. B.) Are split 50/50 between both punitive and compensatory damages. C.) Are used to pay for the claimant's punitive damages. D.) Will be reduced by 75% to lessen the protection an insured has for punitive damages.

A.) Are used to pay for the claimant's compensatory damages. Question Rationale State law does not allow the payment of punitive damages by insurance policies; it only allows for compensatory damages.

What is NOT covered by the liability section of an auto policy? A.) Bodily injury of a covered spouse B.) A neighbor's child who is injured after touching the acid in the battery of an unattended auto C.) The insured's 12-year-old son who accidentally shifts the car into gear while it is parked D.) The insured's neighbor who borrows the covered auto with permission

A.) Bodily injury of a covered spouse Question Rationale Because of the potential moral hazard and other reasons, the auto policy does not cover liability to the named insured or spouse, or family members who reside with the named insured, for personal bodily injury.

Which of the following would NOT generally be included in the supplementary payments portion of the auto policy? A.) Damage to property owned by the insured B.) First aid to others at the time of an accident C.) Expenses the insured incurs at the company's request as part of an investigation or defense D.) Loss of earnings

A.) Damage to property owned by the insured Question Rationale Supplementary payments on an auto policy do not cover the insured's personal property.

A covered auto on a Personal Auto Policy (PAP) includes all of the following EXCEPT A.) Snowmobiles B.) Insured owned utility trailer C.) Temporary substitute vehicle while the insureds is being repaired D.) A newly purchased vehicle if reported within 14 days

A.) Snowmobiles Question Rationale The PAP covers only four wheeled private passenger vehicles and light weight pickups and vans.

Jumbo's Market ceases to operate for a week after its electricity is shut off due to a station wagon striking the transformer supplying electrical current to it. What would be covered by the auto policy covering the station wagon? A.) Spoiled meat in the market's walk-in refrigeration unit B.) Bodily injury to an employee injured while cleaning up the damaged food C.) Cash disappearing from the market's cash register D.) Loss of inventory due to looting during the shutdown

A.) Spoiled meat in the market's walk-in refrigeration unit Question Rationale Only spoiled meat in the market's walk-in refrigeration unit is directly related, by proximate cause, to the damage arising from the auto accident.

What would NOT be covered under a personal auto policy, physical damage section, comprehensive coverage? A.) Theft of a portable radio left on the seat B.) Theft of the hood ornament C.) Theft of the radio mounted in the dash D.) Theft of the spare tire from the trunk

A.) Theft of a portable radio left on the seat Question Rationale Personal items left in the vehicle would have to be covered under the homeowners coverage. Remember, the item must be permanently attached to the vehicle for the auto policy to cover it.

What individual would possess liability coverage under her own auto policy while driving a non-owned auto? A.) None of the choices provided B.) Company executive who borrows a neighbor's auto to go to the office C.) Trucker operating a dump truck of less than one ton D.) Pharmaceutical salesperson operating a company car

B.) Company executive who borrows a neighbor's auto to go to the office Question Rationale Since it is assumed the business firm owning the company auto or the dump truck would have business auto coverage insuring the employee/driver, the personal auto policy excludes these vehicles from coverage.

On a Personal Auto Policy, which of these policy features is NOT a Supplementary Payment? A.) Loss of earnings up to $200 a day B.) Cost of defense C.) Accrued interest on an appeal bond D.) Cost of a bail bond, up to $250

B.) Cost of defense Question Rationale Although cost of defense is covered, it is included as a feature of the Part A, Liability Limit, and not a Supplementary Payment.

The Personal Auto Policy, Part A exclusions include a list of situations not covered. Which of the following is NOT a Part A exclusion? A.) Use of a company car furnished by your employer for your regular use B.) Driving your car in another state C.) Damage to your own property while in transit D.) Use of the car by an auto mechanic while servicing it

B.) Driving your car in another state Question Rationale Coverage for liability in other states is included in the definition of the territory.

An auto policy with a $500 deductible applies to: A.) Other autos suffering body damage in an accident. B.) Each physical damage loss. C.) Transportation expenses. D.) Bodily injury to others caused by an insured.

B.) Each physical damage loss. Question Rationale A deductible is applied to physical damage to the insured auto only, not property damage liability or bodily injury liability.

What loss would be excluded by a policy providing automobile medical payments insurance? A.) A child's finger is caught in the door of the car, breaking the finger B.) Insured is injured when he is underneath the auto and it falls on him while changing the oil C.) Insured's son is thrown from his bicycle and injured when struck by a hit-and-run driver D.) Car's owner is injured in an accident while riding in a taxi

B.) Insured is injured when he is underneath the auto and it falls on him Question Rationale "Med pay" will cover any injuries that result from the occupancy of the insured's vehicle. It will also cover the family for injuries caused by occupying any vehicle. Occupying does not include being underneath the auto.

What incident would be covered under the "medical payments" section of the personal auto policy? A.) The insured is injured when the garage door strikes his head. B.) The insured is struck by a car while riding a bicycle. C.) The insured is struck by flying glass from a collision he witnessed while riding his motorcycle. D.) The insured is struck by a train that he is trying to flag down, because his car is stuck on the track.

B.) The insured is struck by a car while riding a bicycle. Question Rationale Only "The insured is struck by a car while riding a bicycle" involves an automobile

Who of the following would be considered an insured for liability coverage under the insured's personal auto policy? A.) The name insured's neighbor while taking the named insured for a drive in the neighbor's new car B.) The named insured son who lives with the insured while driving a neighbor's car C.) The named insured's neighbor, who borrows the named insured's car without permission D.) The named insured's cousin who, while visiting from another state, drives a car the named insured borrows from the neighbor

B.) The named insured son who lives with the insured while driving a neighbor's car Question Rationale The definition of an insured under the liability portion of the auto policy includes the named insured, spouse and family members meaning those related to you by blood marriage or adoption who reside in your household. Coverage applies for these people for the ownership maintenance or use of ANY auto.

What is considered "your covered auto" under the personal auto policy? A.) Motorcycle B.) Vehicle listed on the declarations page C.) Pickup truck used in the insured's delivery business D.) Farm tractor

B.) Vehicle listed on the declarations page Question Rationale The personal auto policy covers vehicles with four wheels, designed for on-road use and not used for business purposes. This eliminates the tractor and motorcycle. The pickup would be covered under a commercial policy.

Ted owns a personal auto policy with liability limits of 100/300/50. Two persons struck by Ted are awarded $75,000 and $120,000, respectively. What will Ted's policy pay? A.) $175,000 B.) $195,000 C.) $175,000 plus defense costs D.) $195,000 plus defense costs

C.) $175,000 plus defense costs Question Rationale "$175,000 plus defense costs" is a better choice than "$175,000" because a liability policy pays defense costs in addition to the limit of coverage. "$195,000" and "$195,000 plus defense costs" fail to take into account there is a $100,000 per person limit.

Benjamin carries an automobile policy with Company A that has a single limit of $50,000. He borrows an auto from a neighbor who carries an automobile policy with Company B that has a single limit of $100,000. While driving the borrowed auto, Benjamin is involved in an at-fault accident in which a judgment of $125,000 is rendered against him. The loss will be paid in what way (Company A/Company B)? A.) $62,500/$62,500 B.) $50,000/$75,000 C.) $25,000/$100,000 D.) $75,000/$50,000

C.) $25,000/$100,000 Question Rationale Insurance always "follows the car," meaning the policy listing the auto involved in the accident is primary. Company B is primary and will pay up to its limit, $100,000. When the primary coverage is exhausted, the driver's own auto coverage comes into play on an excess basis. Therefore, Company A pays $25,000 and Company B pays $100,000.

Tim is involved in an auto accident with an uninsured motorist and suffers $14,000 of bodily injury damages. His wife Ellen and daughter Maureen suffer $18,000 and $6,000 of bodily injury damages, respectively. Tim's policy provides uninsured motorist limits of 15/30. How much will his policy pay? A.) $32,000 B.) $38,000 C.) $30,000 D.) $14,000

C.) $30,000 Question Rationale Tim's $30,000 per occurrence limit will be exhausted. The policy will pay $14,000 to Tim and $15,000 to Ellen (the maximum per person allowed), leaving only $1,000 for Maureen.

Jim Johnson has an automobile policy with a combined single limit of $50,000. He has an at-fault accident and incurs the following expenses: $30,000 bodily injury judgment, $30,000 property damage judgment, $6,000 attorney's fees for his defense, $300 in premiums for appeals bond, and $75 in bail bond premiums for related traffic violations. What is the maximum amount his insurance company will pay? A.) $50,000 B.) $60,375 C.) $56,375 D.) $66,375

C.) $56,375 Question Rationale The policy would pay up to the single limit of $50,000 and then also pay the defense costs, premium for appeal bonds, and premium for bail bonds (up to $250) under the "supplementary payments" section.

Which of the following losses would be paid under Part D, physical damage, of the personal auto policy? A.) An awning attached to the insured's camper trailer was destroyed by hail B.) The insured collided with a telephone pole while he was using the car as a taxi to earn extra money C.) A permanently installed CD player was damaged when thieves attempted to remove it from the car D.) The insured's pickup truck was contaminated by radioactive materials and had to be destroyed

C.) A permanently installed CD player was damaged when thieves attempted to remove it from the car Question Rationale Since the CD player was permanently installed it is considered part of the auto and therefore covered under part D, physical damage of the policy.

Al borrows a pickup truck to take some furniture to his summer cottage. Who is protected under Al's personal auto policy liability section if driving the truck? A.) Al and his wife only B.) No one C.) Al, his wife, and his son D.) Al only

C.) Al, his wife, and his son Question Rationale All family members are covered while driving any vehicle with the belief they are entitled to do so.

What loss would NOT be covered under a policy providing automobile comprehensive physical damage? A.) All of the choices presented B.) Theft of tires from the car C.) Car runs over a log, causing a blown tire D.) Dog shut in parked car chewing upholstery

C.) Car runs over a log, causing a blown tire Question Rationale Road hazards that do damage to tires, are not covered under the comprehensive section of the auto policy.

Most automobile policies exclude coverage while in A.) Hawaii B.) Puerto Rico C.) Mexico D.) Canada

C.) Mexico Question Rationale Mexico is not part of the coverage territory. Before entering Mexico, you should purchase coverage for Mexico.

In automobile insurance, additional (supplementary) payments refer to A.) Payments received by the insured directly from the person or persons who caused a loss. B.) Payments made by the insurance company for the insured's own medical expenses, to supplement any other medical insurance. C.) Payment of Bail and Appeal bonds and accrued interest on judgments. D.) Payments made by the insured for damages exceeding the policy limits.

C.) Payment of Bail and Appeal bonds and accrued interest on judgments. Question Rationale Supplementary payments are made in addition to the limits of bodily injury and property damage shown on the "declarations" page. Such things as bail bonds up to $250, loss of earnings up to $200 and pre-judgment and post-judgment interest are included.

What is NOT generally considered to be a type of uninsured motorist? A.) Driver with no liability insurance B.) Phantom driver C.) Person using an insured's auto with permission D.) Hit-and-run operator

C.) Person using an insured's auto with permission Question Rationale An uninsured motorist is a driver in another car who causes bodily injury to you. A person using your insured auto with permission could not be an uninsured motorist. A phantom driver is one who can make you swerve into another lane and create an accident, and then flees the scene.

Which of the following would be considered a non-owned vehicle using the PAP definition of a Covered Auto, under Part D, Physical Damage? A.) Pick-up truck you own and use strictly for farming activity B.) Sports car you lease for a full year C.) Pick-up you rent while your van is in the shop for repair D.) Small trailer for errands you and a neighbor bought

C.) Pick-up you rent while your van is in the shop for repair Question Rationale Temporary replacement vehicles are covered for liability and physical damage if your vehicle is out of service.

Where are accidents covered in the Personal Auto Policy definition of the Territory? A.) Worldwide B.) The United States only C.) The United States, its territories and possessions, Canada, and Puerto Rico. D.) The United States or Canada only

C.) The United States, its territories and possessions, Canada, and Puerto Rico. Question Rationale The territory is specifically defined in Part F, General Provisions.

The insured has a personal auto policy. He drives his covered van in a share-in-the-expense carpool. What is correct? A.) The passengers' policies will apply on a pro rata basis. B.) The exclusion relating to business use applies. C.) The share-in-the-expense carpooling is not excluded. D.) There is no coverage, due to the exclusion regarding carrying persons for a fee.

C.) The share-in-the-expense carpooling is not excluded. Question Rationale The personal auto policy does not exclude coverage for people sharing expenses while carpooling. If the insured was charging a fee for the car pooling, then it would be excluded.

Betsy must miss work to testify at trial concerning an auto accident that she caused. What amount, if any, will the personal auto policy pay for Betsy's lost wages? A.) Up to $100 per day B.) Her actual lost amount of wages from work C.) Up to $200 per day D.) Nothing

C.) Up to $200 per day Question Rationale The supplementary payments of the auto policy will provide up to $200 per day for lost wages if the insured misses work to help the insurer settle a claim.

Under the personal auto policy, what vehicle is considered a "covered auto?" A.) Motorcycle B.) Unlicensed trail bike C.) Van being used to drive to work listed on the declarations page D.) Van being used in the insured's delivery truck business

C.) Van being used to drive to work listed on the declarations page Question Rationale A van would be described as a four-wheeled vehicle designed for on-road use, and would be a covered auto if listed on the declarations page.

Mary has a Personal Auto Policy (PAP), with Part A limits of $100,000 / $300,000. She borrows her neighbor's pick-up one day to run an errand, and while using it, accidently strikes a pedestrian causing injury. Her neighbor, Art, also has a PAP policy with Part A limits of $250,000 / $500,000. How much will Mary's policy pay for a $300,000 judgment against her? A.) $100,000 B.) $0 C.) $300,000 D.) $50,000

D.) $50,000 Question Rationale Mary's PAP includes liability coverage for non-owned autos, but on an excess basis. Since coverage follows the owner as the primary insurer, Art's policy will pay first, paying the total of $250,000 for injury to any one person. Mary's policy will pay the remainder as long as it doesn't exceed her own policy limit for any one person.

Uninsured motorist coverage A.) Includes Underinsured Motorist coverage. B.) Can be purchased up to 100% of the bodily injury limit. C.) Is an optional coverage. D.) All of the choices presented

D.) All of the choices presented Question Rationale Uninsured motorist coverage is an extremely important coverage. If someone chooses to purchase it, the amount of coverage cannot exceed the limit for bodily injury liability, and underinsured motorist coverage comes automatically.

What personal auto policy coverage protects an insured's covered auto that damages a telephone pole owned by a town or municipality? A.) Medical payments B.) Comprehensive C.) Property damage liability D.) Collision

D.) Collision Question Rationale Collision covers physical damage to the insured auto, not property damages to others. Collision is a crash with another object such as a tree, car, or pole. Liability covers the other person or property.

An insured whose legally parked car is damaged by a mudslide may collect for damages under what coverage? A.) Medical payments B.) Collision C.) Property damage liability D.) Comprehensive (other than collision)

D.) Comprehensive (other than collision) Question Rationale Comprehensive coverage provides for physical loss to the insured auto arising from any cause of loss that is not (by definition) collision or excluded.

The insured's neighbor has an uninsured vehicle, which he seldom uses. He gives the insured the keys and advises him to use it whenever he wishes. Under what circumstance is this a covered auto under the insured's PAP policy? The insured A.) Goes to pick up his daughter at school. B.) Goes to purchase automobile parts for his employer. C.) Goes to pick up a new starter for his own car. D.) Goes to get a new battery because his car has a dead one.

D.) Goes to get a new battery because his car has a dead one. Question Rationale A non-owned automobile is covered only if it is used as a temporary substitute because your car is not useable due to service, repair, breakdown or destruction.

What is NOT covered by automobile comprehensive coverage? A.) Glass breakage B.) Collision with a deer C.) Theft D.) Mechanical breakdown during the warranty period

D.) Mechanical breakdown during the warranty period Question Rationale Mechanical breakdown is a named exclusion under comprehensive coverage.

As a condition of automobile coverage, the insured is required to do what in the event of an accident? A.) Report the accident to the state motor vehicle department B.) Notify the insurance company of the accident as soon as possible C.) Report the accident to the state insurance department D.) Notify the police department of the accident as soon as possible

D.) Notify the police department of the accident as soon as possible Question Rationale It is a condition of auto insurance, like all other insurance, to report a potential loss as soon as possible. However, notification needs to be made to the police in case of an accident.

Which of the following would NOT meet the definition of an Uninsured Motor Vehicle? A.) Another car strikes you, has liability insurance, but his insurer denies the claim or is insolvent B.) Hit and run auto C.) Vehicle hits you, has liability insurance, but the limit is in violation of state Financial Responsibility law D.) Vehicle owned by the U.S. Government

D.) Vehicle owned by the U.S. Government Question Rationale The U.S. Government is self-insured, and deemed to be financially responsible in all states.

Is any kind of property (other than the auto itself) covered under the physical damage section of the personal auto policy? A.) Yes--personal property of the insured is covered if the vehicle is locked. B.) Yes--equipment used for the reproduction of sound is covered. C.) No--all personal property must be covered under the homeowners contract. D.) Yes--it covers standard tools necessary for the auto.

D.) Yes--it covers standard tools necessary for the auto. Question Rationale The standard tools necessary for the auto such as the tire jack would be covered under the physical damage section of the auto policy.

Who is NOT considered insured as a family member under the PAP? A.) Your uncle, who just moved in B.) Your daughter, who lives with you C.) Your step-son, who lives with you D.) Your nephew, who lives in another town

D.) Your nephew, who lives in another town Question Rationale Your nephew is related to you, but is not a family member since he does not live with you.