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FIN 350 Exam 2 > Chapter 21 > Flashcards

Chapter 21 Flashcards

1
Q

states use a number of approaches to provide some protection to accident victims from irresponsible and reckless drivers. They include:

  1. Financial responsibility laws
  2. compulsory insurance laws
  3. unsatisfied judgement funds
  4. uninsured ____ ______
  5. low cost auto insurance
  6. no ___, no _____
  7. __ ____ auto insurance
A

motorists coverage, pay and play, no fault

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2
Q

a ___ ____ law does not require proof of financial responsibility until after the driver has his or her first accident or until after conviction for certain offenses, such as driving under the influence of alcohol.

A

financial responsibility law

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3
Q

Proof of financial responsibility is typically required under the following circumstances:
1. after an accident involving bodily injury or property damage over a certain amount
2. upon failure to pay a final ___ resulting from an auto accident
3. following a conviction for certain offenses, such as
Under these conditions, if a motorist cannot demonstrate that they meet financial responsibility requirements, the state can revoke or suspend the motorist’s driving privileges.

A

judgement, drunk or reckless driving

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4
Q

other ways in which the financial responsibility law can be satisfied are by posting a ___, by depositing securities or money in the amount required by law, or by showing that the person is a ___ ___ ___

A

bonds, qualified self insurer

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5
Q

Although financial responsibility laws provide some protection against irresponsible motorists, they have two major defects:

  1. there is no guarantee that all ____ ____ will be paid.
  2. Accident victims may not be ____ ____ for their injuries.
A

accident victims, fully indemnified

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6
Q

a _____ _____ law requires motorists to carry at least a minimum amount of liability insurance before the vehicle can be licensed or registered

A

compulsory insurance

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7
Q

Some people believe that compulsory insurance laws provide ___ ____ than financial responsibility laws because motorists must provide financial responsibility before an accident occurs.

A

greater protection

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8
Q

studies by various groups conclude that compulsory insurance laws generally are _____ in reducing percentage of uninsured drivers.

A

ineffective

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9
Q

critics of compulsory insurance laws cite the following defects:

  1. in general, there is no correlation between compulsory insurance laws and the number of uninsured vehicles on the highway
  2. although lower income drivers support a liability insurance requirement, many _______
  3. some states have employed computer databases to attempt to track uninsured motorists
A

simply cannot afford the coverage

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10
Q

under ____ _____ ____, the injured person’s insurer agrees to pay the accident victim who has a bodily injury caused by a ______ _____, by a hit and run driver, or by a negligent driver whose insurer is insolvent.

A

uninsured motorists coverage

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11
Q

advantages to uninsured motorists coverage:

  1. motorists have some protection against an uninsured driver
  2. claim settlement is ____ and more _____ than a tort liability lawsuit.
A

faster, efficient

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12
Q

uninsured motorists coverage has several defects as a technique for compensating injured auto accident victims. they include the following:

  1. unless higher limits are purchased, the maximum amount paid is limited to the limits specified in the state’s financial responsibility or compulsory insurance law requirement.
  2. the injured person must establish the uninsured motorist is _____ _____ for the accident.
  3. property damage is not covered in most states.
A

legally liable

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13
Q

law which restricts uninsured motorists from suing negligent drivers for noneconomic damages, such as compensation for pain and suffering.

A

no, no play law

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14
Q

another method for compensating injured accident victims, means that after an auto accident involving bodily injury, each party collects from his or her own insurer regardless of fault.

A

no fault auto insurance.

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15
Q

if a bodily injury claim is below a certain monetary threshold, (such as $___) an injured motorist is not permitted to sue but instead would collect from his or her own insurer. if the injury claim exceeds the threshold, the injured person has the right to _______. If the negligent driver is insured, the negligent driver’s insurance company will usually cover the loss.

A

5,000. right to sue the negligent driver for damages.

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16
Q

means that a suit for damages is allowed only in serious cases, such as those involving death.

A

verbal threshold

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17
Q

several types of no fault plans and proposals exist. they include the following:

  1. pure no fault plan
  2. modified no fault plan
  3. ___ __ plan
  4. ____ _____ plan
A

add-on, choice no fault

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18
Q

type of no fault plan where accident victims could not sue at all, regardless of the amount of the claim, and no payments would be made for pain and suffering. no state has this plan currently.

A

pure no fault

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19
Q

type of no fault plan where an injured person has the right to sue a negligent driver only if the injury claim exceeds the dollar or verbal threshold.

A

modified no fault

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20
Q

type of no fault plan that pays benefits to an accident victim without regard to fault, and the injured person still has the right to sue the negligent driver who caused the accident.

A

add on plan

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21
Q

three states (kentucky, new jersey and pennsylvania) have this no fault plan, where motorists can elect to be covered or not covered under the states no fault law and pay lower premiums, or they can retain the right to sue under the tort liability system and pay higher premiums.

A

choice no fault plan

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22
Q

no fault benefits are provided by adding an endorsement to an auto insurance policy, typically called

A

personal injury protection coverage (PIP)

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23
Q

no fault benefits are restricted to the injured person’s ___ ____, such as medical expenses, a percentage of lost wages, and certain other expenses.the injured person can sue for ____ ___ only if the dollar threshold is exceeded or the verbal threshold is met.

A

economic loss, noneconomic loss

24
Q 
The following benefits are typically provided for no fault benefits:
medical expenses
loss of earnings
essential services expenses
\_\_\_ expenses
\_\_\_\_ \_\_\_\_\_ benefits
A

funeral, survivors loss

25
Q

these expenses include housework, cooking, lawn mowing and house repairs.

A

essential services expenses

26
Q

in states with modified no fault laws, the right to sue is

A

restricted.

27
Q

no fault laws cover only bodily injury and not _______. thus, if a negligent driver smashed into your car, you would still be permitted to sue for the property damage to your car.

A

property damage

28
Q

arguments for no-fault insurance:

  1. it is often difficult to ___________
  2. there are inequities in claim payments.
  3. present tort system incurs high _____ costs and ___ fees.
  4. present system is flawed because of fraud and inflated claims
  5. under the present system, there is often delay in ____
A

determine fault in auto accidents, transaction and attorney, payments

29
Q

arguments against no-fault laws:

  1. defects of the negligence system are _____
  2. claims of efficiency and premium savings are exaggerated.
  3. court delays are not _____
  4. safe drivers may be _____
  5. there is no payment for pain and suffering
  6. the present tort liability system needs only to be reformed.
A

exaggerated, universal, penalized.

30
Q

evaluation of no-fault laws:

  1. no-fault plans reduce transactions costs
  2. no fault plans match compensation received from an injury more closely with the economic loss sustained.
  3. no fault plans eliminate compensation for ______ for injured people below the threshold with less serious injuries
A

noneconomic loss

31
Q

evaluation of no fault laws cont’d:

  1. no fault plans generally pay benefits more quickly
  2. no fault plans can yield substantial savings over the traditional system, or such plans can increase costs depending on plan design.
  3. on the negative side _____________
A

fraud claims have been a problem in several states.

32
Q 
The major rating factors for determining private passenger auto premiums are as follows:
territory
age, gender and marital status
use of the auto 
\_\_\_ \_\_\_\_
\_\_\_\_ \_\_\_\_\_ discount
number and types of cars
\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_
insurance scores
A

driver education, good student discounts, individual driving record

33
Q

base rate for liability insurance is first established, determined largely by the ___ where the auto is principally used and garaged. thus, a city driver normally pays a higher rate than a rural driver because of the higher number of auto accidents in congested cities.

A

territory

34
Q

in particular, auto insurance premiums are substantially higher in larger cities because of factors such as ___ ___ of traffic, increased likelihood of ___ and ____, and higher incidence of fraud.

A

higher density, theft and vandalism

35
Q

___ is an extremely important factor because ___ drivers are involved in a disproportionate number of auto accidents.

A

age, young

36
Q

___ drivers are typically involved in a higher proportion of both total accidents and fatal auto accidents than ___ drivers.

A

male, female

37
Q

_____ is also more important for some age groups, because young ___ ___ drivers tend to have relatively fewer accidents than ______ ___ drivers in the same age category.

A

marital status, married male, unmarried male

38
Q

a premium credit may be given if a youthful driver of a family car is _____________

A

attending college more than 100 miles away from home and doesn’t have a car at school.

39
Q

use of the auto is usually classified by the insurer based on how the car is driven, such as:
pleasure use; not used in business or customarily driven to work, unless one-way mileage to work is under three miles
drive to work: not used in business, but is driven __ to __ miles to work each day.
drive to work: not used in business, but is driven __ or more miles each way
business use: customarily used in business or professional pursuits
farm use: principally garaged on farm or ranch

A

5 to 15, 15 or more

40
Q

a car classified for __ use has the lowest rating actor, followed next by ___ use of the car. Driving the car to work or using it for business purpose requires

A

farm, pleasure; a higher factor rating.

41
Q

electronic device that can be installed in a vehicle to track certain driving behaviors.

A

data recorders

42
Q

if a youthful operate successfully completes an approved ____ ___ course, they can receive a driver training credit, such as 10 or 15 percent.

A

driver education

43
Q

a ___ ___ discount is based on the premise that ___ ____ are better drivers, the psychological makeup and intellectual capacity of ____ ____ also contribute to the safer operation of an auto.

A

good student

44
Q 
to qualify for a good student discount, must be a full time student in high school or college, at least 16 and meet one of following:
rank in upper 20% of class
have a B or better average
have at least a \_\_\_ average
be on deans list or honor roll
A

3.0

45
Q

a ___ discount is available if the insured owns two or more cars. based on assumption that two cars owned by the same person will be driven more than one car

A

multicar

46
Q

many insurers have safe driver plans where the premiums paid are based in large part on the __ ___ ____ of the insured and vehicle operators who live with the insured.

A

individual driving records

47
Q

credit-based score that proponents claim is highly predictive of future claim costs.

A

insurance score

48
Q

the most important rule in purchasing auto insurance is to carry

A

adequate liability insurance

49
Q

a negligent driver who is underinsured could have a ____ ____ filed against him or her, under which both present and future income and assets could be attached to satisfy the judgement.

A

deficiency judgement

50
Q

another important suggestion when shopping for auto insurance is to carry ___ ____ for collision and other than collision losses.

A

higher deductible

51
Q

rule of thumb that when your car is older than __ years old to drop collision insurance on car because cost of repairs often exceed value of an older car, and the insurer will pay no more than its current market value.

A

6

52
Q

another important suggestion is to ___________, because there is intense price competition, and may be a significant difference in premiums.

A

shop carefully for auto insurance.

53
Q

when shopping for auto insurance, you should determine whether you are eligible for __________

A

one or more discounts.

54
Q 
common discounts include:
multicar discount: 10-15%
no accidents in 3 years: 5-10%
drivers over age 50: 5-15%
defensive driving course: 5-10%
\_\_ \_\_\_: 5-50% for comprehensive loss
antilock brakes: 5-10%
A

antitheft device

55
Q

____________ will substantially reduce your premiums.

A

improving your driving record

56
Q

another important suggestion is to _______.

A

maintain good credit.

FIN 350 Exam 2 (3 decks)

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