Chapter 19

Question 1

In a state requiring 25/50/5 auto liability coverage, the required coverage for BI per person is:

Select one:

a. $5,000
b. $10,000
c. $25,000
d. $50,000

Answer 1

The first number always indicates the Bodily Injury Liability coverage per person. Here that is $25,000. The second number is the Bodily Injury Liability coverage for all persons injured ($50,000). The third number is the Property Damage Liability coverage ($5,000).

The correct answer is: $25,000

Question 2

While Jo was passing a cement truck, small rocks fell from the truck onto Jo’s auto. With reference to Jo’s auto policy, this is:

Select one:

a. not covered.
b. covered by collision.
c. covered without a deductible.
d. covered by comprehensive.

Answer 2

Falling objects are covered by comprehensive (Other Than Collision). This is not covered by Collision.

The correct answer is: covered by comprehensive.

Question 3

The Physical Damage section of the auto policy’s collision coverage pays on what basis?

Select one:

a. stated or agreed value
b. fair market value
c. ACV
d. replacement cost

Answer 3

Physical Damage refers to Collision and Comprehensive (Other Than Collision) coverage on the Insured’s vehicle. This is ACV rather than Replacement Cost coverage. The Insurer doesn’t want to have to replace the old car with a new car.

The correct answer is: ACV

Question 4

Which provides the best coverage?

Select one:

a. single limit policies
b. split limit policies

Answer 4

The correct answer is: single limit policies

Question 5

Bodily injury caused by a hit-and-run driver is covered by:

Select one:

a. uninsured motorist
b. underinsured motorist

Answer 5

The correct answer is: uninsured motorist

Question 6

A comprehensive auto policy covers:

Select one:

a. road damage to the tires
b. med pay
c. frozen engine block
d. earthquake damage to the vehicle

Answer 6

Comprehensive refers to the all-risk (special) coverage that applies under the Other Than Collision (OTC) coverage.

The correct answer is: earthquake damage to the vehicle

Question 7

Auto med pay covers:

Select one:

a. the other guy
b. the Insured and passengers

Answer 7

The correct answer is: the Insured and passengers

Question 8

“Other than collision” covers:

Select one:

a. An IPod stolen from the car.
b. A car is damaged in a flood.
c. A new tire is damaged by a pothole.
d. A car’s engine is damaged when it runs out of oil.

Answer 8

“Other Than Collision” (OTC) used to be referred to a comprehensive. It does not cover (obviously) a collision. “Collision” covers collision. But, the OTC won’t cover road damage to tires, wear and tear, inherent vice, or theft of items carried in the vehicle. So, OTC will cover such perils as flood and earthquake. The theft of the cell phone would be covered under the Homeowner Policy (which covers most of our stuff everywhere in the world, including in our cars).

The correct answer is: A car is damaged in a flood.

Question 9

While Sam was intoxicated, he negligently drove his vehicle through the wall of a tavern. The tavern had to close for 3 weeks to make repairs. Sam and his auto liability insurer are responsible for:

Select one:

a. only bodily injury caused to any tavern patrons
b. the damage to the tavern only
c. the damage to the tavern, the lost revenue during the period of repair, and injury to the patrons
d. the tavern’s lost revenue during the 3 week repair period only

Answer 9

Auto insurance follows the typical liability policy’s tradition of paying for both bodily injury and property damage. The bodily injury to the tavern patrons is obviously covered as bodily injury. The damage to the building and the lost revenue would be a property damage loss. Liability covers both direct loss (damage to the building) and indirect loss (loss of revenue). Fortunately, the auto policy does not exclude situations where the driver was intoxicated. So, the policy will pay for the damage, the lost revenue, and the injury to the patrons.

The correct answer is: the damage to the tavern, the lost revenue during the period of repair, and injury to the patrons

Question 10

An auto policy CANNOT be canceled if the Insured:

Select one:

a. fails to make the premium payments
b. makes a written request to cancel
c. returns the policy
d. obtains another auto policy on the same vehicle from another insurer

Answer 10

Having multiple policies permits the Insurer to reduce the claim payment (usually proportionally) according to the Other Insurance Clause. This prevents the Insured from “stacking” the policies to come out ahead. So, the Other Insurance Clause upholds the principle of Indemnification.

The correct answer is: obtains another auto policy on the same vehicle from another insurer

Question 11

If you cause an accident while using a friend’s car, the car’s insurance pays:

Select one:

a. primary
b. excess

Answer 11

The correct answer is: primary

Question 12

Molly’s state requires 25/50/10 auto liability insurance. Molly is involved in an accident with an at-fault driver who only has 15/30/5 coverage.

Molly is protected by her:
Select one:
a. uninsured motorist
b. underinsured motorist

Answer 12

The correct answer is: uninsured motorist

Question 13

Under an auto policy, each of the following driving the vehicle with consent of the Insured has liability coverage EXCEPT:

Select one:

a. a nephew who is not a resident in the home
b. a neighbor who borrows the car
c. a mechanic test driving the car
d. a cousin who is a resident in the home

Answer 13

The policy excludes the mechanic because the mechanic’s employer should have a specialized liability policy to cover this accident.

The correct answer is: a mechanic test driving the car

Question 14

An auto accident causing bodily injury and property damage results in:

Select one:

a. policy cancellation
b. liability

Answer 14

The correct answer is: liability

Question 15

Which of the following is an Insured under a personal auto policy?

Select one:

a. An employee of an auto repair shop returning the vehicle to the Insured.
b. A business furnishing an auto to an employee.
c. A friend who borrows a car without permission.
d. The Insured’s 12 year-old living at home.

Answer 15

The auto policy will cover all family members residing with the Insured. Those family members are “Insureds” even if they are under driving age, don’t have a drivers’ license, are intoxicated, or are using the vehicle without express consent. Thus, the 4-year old who climbs out of the car seat and kicks the transmission into drive (causing an accident) will be covered as an “Insured.”

The correct answer is: The Insured’s 12 year-old living at home.

Question 16

Under an auto policy, medical payments limits are:

Select one:

a. per person.
b. per accident.

Answer 16

The correct answer is: per person.

Question 17

The Personal Auto Policy covers “Transportation Expenses” for $20 per day up to a total of $600. The purpose of the “Transportation Expense” coverage is to help the Insured pay the cost of a rental replacement vehicle:

a. following a covered Collision or Other Than Collision loss to the insured vehicle.
b. when the Insured vehicle is being repaired following a mechanical breakdown.

Answer 17

The correct answer is: following a covered Collision or Other Than Collision loss to the insured vehicle.

Question 18

If an accident occurs when an Insured is driving a vehicle owned and insured by another, which is generally correct?

Select one:

a. the vehicle’s policy pays primary
b. the driver’s policy pays primary

Answer 18

The correct answer is: the vehicle’s policy pays primary

Question 19

Which is a covered nonowned auto?

Select one:

a. A company car furnished for the Insured.
b. A car left with the Insured by a friend who is abroad for 3 years.
c. An auto operated by the Insured but owned by another member of the family.
d. A motorcycle operated by the Insured but owned by another member of the family.

Answer 19

The auto policy excludes coverage for vehicles with fewer than four wheels, vehicles regularly available for the Insured’s use, and vehicles furnished for the insured’s use (company car). But the auto policy will cover a vehicle temporarily borrowed by the Insured.

The correct answer is: An auto operated by the Insured but owned by another member of the family.

Question 20

Which can be purchased alone?

Select one:

a. comprehensive
b. collision

Answer 20

The correct answer is: comprehensive

Question 21

The definition of “owned auto” under a Personal Auto Policy includes each of these EXCEPT:

Select one:

a. The insured’s trailer hitched to the insured auto.
b. An all-terrain vehicle with 3 wheels.
c. The insured’s leased auto.
d. A new car purchased by the insured 3 days ago but not yet reported to the insurer.

Answer 21

The correct answer is: An all-terrain vehicle with 3 wheels.

Question 22

A single limit auto policy provides $200,000 coverage. The Insured causes an accident in which 4 persons suffer injuries totaling $250,000. The Insurer must pay:

Select one:

a. $200,000
b. $250,000

Answer 22

The correct answer is: $200,000

Question 23

Auto medical payments:

Select one:

a. is required in all states
b. covers the Insured and passengers in the insured vehicle for both medical and funeral expenses
c. covers any pedestrian struck by the auto
d. pays regardless of any benefits paid by other policies

Answer 23

Med pay is an optional coverage which covers medical expenses of the Insured and passengers in the Insured’s vehicle. It also covers the Insured and family members when in other vehicles or as pedestrians.

The correct answer is: covers the Insured and passengers in the insured vehicle for both medical and funeral expenses

Question 24

Under an auto policy’s “other insurance clause,” coverage for a nonowned auto is provided by which method?

Select one:

a. the other policy pays primary.
b. the other policy pays excess.
c. the other policy pays equally.
d. the other policy pays pro rata.

Answer 24

The correct answer is: the other policy pays primary.

Question 25

Sam has underinsured motorist coverage with limits of $100/$300. Sam is injured by Quincy who has limits of $50/$100. Sam’s injuries are valued at $125,000. Sam’s underinsured motorist coverage will pay:

Select one:

a. $25,000
b. $50,000
c. $75,000
d. $125,000

Answer 25

Picky point! Underinsured Motorist merely tops off the coverage to bring the victim up to the limit of liability. So, it never pays its full limit. Quincy’s policy pays the first $50,000 and then the UnderInsured Motorist policy pays the balance until it reaches the $100,000 limit. So, it will only pay an additional $50,000.

The correct answer is: $50,000

Question 26

The insured is also covered when driving:

Select one:

a. a motorcycle
b. a rental car
c. a car regularly furnished for the Insured’s use
d. another car the Insured owns

Answer 26

The correct answer is: a rental car

Question 27

The comprehensive section of an auto policy covers which of the following?
Select one:

a. road damage to tires
b. earthquake damage
c. a mechanic installs a wrong part in the motor
d. furniture stolen from the auto

Answer 27

Surprisingly, the auto policy’s comprehensive coverage will cover even floods and earthquakes. Road damage to tires is an exclusion. The stolen furniture is better covered under a Homeowner policy. The mechanic’s act of installing the wrong part would be covered under the mechanic’s liability policy.

The correct answer is: earthquake damage

Question 28

You insure damage to your car through:

Select one:

a. physical damage
b. property damage

Answer 28

The correct answer is: physical damage

Question 29

Uninsured Motorist covers:

Select one:

a. the Insured as a pedestrian when struck by an Uninsured Motor Vehicle
b. a friend of the Insured while a passenger in a covered auto
c. both A and B
d. none of the above

Answer 29

“Insured” as used in Uninsured Motorist includes any person while a passenger in a covered auto, the Insured and family members while a passenger in any vehicle, and the Insured and any family member as a pedestrian when struck by an Uninsured Motor Vehicle.

The correct answer is: both A and B

Question 30

The definition of “covered auto” does NOT include:

Select one:

a. the Insured’s trailer
b. a company car available for the Insured’s regular use
c. a rental vacation car
d. a new van purchased last week

Answer 30

The correct answer is: a company car available for the Insured’s regular use

Question 31

Which section of an auto policy covers a pedestrian injured by the insured owner of the auto?

Select one:

a. med pay
b. liability
c. collision
d. comprehensive

Answer 31

Liability covers pedestrians injured by the Insured. However, med pay covers the Insured if the Insured is injured as a pedestrian.

The correct answer is: liability

Question 32

Damage to another person’s auto caused by an intoxicated Insured driving a vacation rental car is covered by:

Select one:

a. Liquor Liability Coverage
b. Nonowned Auto Coverage
c. Temporary Substitute Coverage
d. Physical Damage Coverage

Answer 32

The vacation car is a Nonowned Auto which is covered even (or especially) if the Insured is intoxicated. “Temporary Substitute” refers to the loaner when the Insured’s car is in the shop for repairs.

The correct answer is: Nonowned Auto Coverage

Question 33

The transportation expenses following a deer damaging the auto are covered under the Personal Auto Policy’s:

Select one:

a. Collision coverage
b. Supplementary coverage
c. Medical Payments coverage
d. Comprehensive (Other Than Collision) coverage

Answer 33

Such perils as flood, earthquake, theft, and hitting a deer are covered by Comprehensive, so that section of the policy will cover the Transportation Expense of a rental car for $20 per day up to a total of $600.

The correct answer is: Comprehensive (Other Than Collision) coverage

Question 34

A personal auto policy covers:

Select one:

a. unlicensed intoxicated drivers
b. only sober drivers
c. only licensed drivers
d. only sober, licensed drivers

Answer 34

One of the primary reasons we all buy auto insurance is to be covered if we are hit by a drunk driver (or if we are the drunk driver). Of course, auto insurance covers the intoxicated driver, the driver under the influence of a controlled substance, but not an intentional act.

The correct answer is: unlicensed intoxicated drivers

Question 35

Which section of the Insured’s personal auto policy covers the Insured as a pedestrian when struck by a vehicle?

Select one:

a. liability
b. bodily injury
c. medical payments
d. comprehensive

Answer 35

The correct answer is: medical payments

Question 36

A vehicle you drive while yours is out of service due to repairs is called an?

Select one:

a. temporary substitute
b. replacement vehicle

Answer 36

The correct answer is: temporary substitute

Question 37

An Insured’s personal policy provides a number of coverages.

A passenger in the Insured’s car suffered $17,000 bodily injury when the vehicle swerved off the road and hit a building.

The passenger’s bodily injuries are covered by:

Select one:

a. collision
b. physical damage
c. comprehensive
d. liability

Answer 37

The correct answer is: liability

Question 38

Which section of the personal auto policy covers the costs of expert witnesses?

Select one:

a. Declarations
b. Insuring Agreements
c. Conditions
d. Exclusions

Answer 38

All payments made by the Insurer fall within the Insuring Agreements section of the policy. You were probably looking for supplementary payments as the more specific answer, but here the more general answer is also correct.

The correct answer is: Insuring Agreements

Question 39

The primary exclusion from comprehensive is:

Select one:

a. theft
b. collision

Answer 39

The correct answer is: collision

Question 40

If you are hit by someone with no insurance, you should have:

Select one:

a. underinsured motorist
b. uninsured motorist

Answer 40

The correct answer is: uninsured motorist

Question 41

Which is covered as a Temporary Substitute while the covered auto is out of service due to breakdown?

Select one:

a. A motorcycle borrowed from a neighbor.
b. A motorcycle borrowed from a family member.
c. Any other auto owned by the Insured.
d. A neighbor’s van borrowed to drive to work.

Answer 41

The personal auto policy never covers motorcycles.

The correct answer is: A neighbor’s van borrowed to drive to work.

Question 42

Comprehensive covers hitting:

Select one:

a. a train
b. a deer

Answer 42

The correct answer is: a deer

Question 43

Hitting a parked car is covered by:

Select one:

a. comprehensive
b. collision

Answer 43

The correct answer is: collision

Question 44

If you are hit by someone with inadequate insurance, you should have:
Select one:

a. underinsured motorist
b. uninsured motorist

Answer 44

The correct answer is: underinsured motorist

Question 45

Uninsured motorist covers:

Select one:

a. physical damage
b. personal injury
c. property damage
d. bodily injury

Answer 45

In most states, the optional Uninsured Motors and Underinsured Motorist cover only Bodily Injury for an Insured or passenger in the Insured’s vehicle. But, we have to watch out because some states will require these, or combine them, or require them to cover Property Damage to the Insured’s vehicle. But, generally speaking, they only cover Bodily Injury.

The correct answer is: bodily injury

Question 46

After an auto accident, the auto policy requires the Insured to notify the:

Select one:

a. police
b. Insurer

Answer 46

The correct answer is: Insurer

Question 47

Auto med pay:

Select one:

a. covers any pedestrians hit by the Insured’s auto
b. pays medical and funeral expenses for the Insured and any passengers in the Insured’s auto
c. pays regardless of coverages in other policies
d. is required by both federal and state law

Answer 47

With auto insurance, Med Pay covers the Insured and passengers in the Insured’s auto. This is a bit weird because most Casualty Policies cover the “other guy” with Med Pay. Not so with the auto policy. However, Med pay won’t allow stacking policy coverages to come out ahead. Med Pay is (in most states) an optional coverage.

The correct answer is: pays medical and funeral expenses for the Insured and any passengers in the Insured’s auto

Question 48

A new car you buy is automatically insured for:

Select one:

a. 14 days
b. 21 days
c. 30 days
d. 60 days

Answer 48

The correct answer is: 14 days

Question 49

The only thing you can hit and be covered by comprehensive is?

Select one:

a. a parked car
b. a bird or animal

Answer 49

The correct answer is: a bird or animal

Question 50

Auto med pay covers:

Select one:

a. the Insured as a pedestrian.
b. other persons as pedestrians.

Answer 50

The correct answer is: the Insured as a pedestrian.

Question 51

Persons covered under a personal auto policy are identified in which policy section?

Select one:

a. Insuring agreement
b. Definitions
c. Conditions
d. Exclusions

Answer 51

New Point - Not in text! To find out who the Insured is, the Personal Auto Policy contains a Definitions section that is separate than the Conditions section.

The correct answer is: Definitions