CPCU 553 Ch. 2

Question 1

Law enacted to ensure that motorists have the financial ability to pay for any property damage or bodily injury they might cause as a result of driving or owning an auto

Answer 1

Financial responsibility law

Question 2

Law that requires the owners or operators of automobiles to carry automobile liability insurance at least equal to certain minimum limits before the vehicle can be licensed before the vehicle can be licensed or registered

Answer 2

Compulsory auto insurance law

Question 3

The insured in an insurance contract

Answer 3

First party

Question 4

A fund designed to provide a source of recovery for victims of motor vehicle accidents when an at-fault motorist is unable to pay any judgement

Answer 4

Unsatisfied judgement fund

Question 5

Coverage that provides a source of recovery for occupants of covered auto or for qualifying pedestrians who are injured in an accident caused by an at fault motorist who does not have the state minimum liability insurance or by hit and run driver

Answer 5

Uninsured motorists coverage

Question 6

Coverage that applies when a negligent driver has liability insurance at the time of the accident but has limits lower than those of insured person’s coverage

Answer 6

Underinsured motorists coverage

Question 7

Insurance that covers automobile accident victims on a first party basis, allowing them to collect damages from their own insurers regardless of who was at fault

Answer 7

No fault automobile insurance

Question 8

State statues that require motorists to purchase (or require insurers to make available) insurance that provides minimum first party benefits to injured persons regardles of fault

Answer 8

No fault laws

Question 9

In a no fault system, a dollar limit in total medical expenses an injured victim must exceed before he or she permitted to sue the other party

Answer 9

Monetary threshold (dollar threshold)

Question 10

In a no fault system, the designated criteria that are verbally set forth in the statue that limit the right to use

Answer 10

Verbal threshold

Question 11

In a no fault system, a plan that provides certain personal injury protection (PIP) type benefits such as medical payments and disability coverages to injured victims, without regard to fault

Answer 11

Add-on plan

Question 12

In a no fault system, a plan that gives the insured the option, at the time an auto insurance policy is purchased or renewed, of choosing whether to be covered on a no fault basis

Answer 12

Choice no fault plan

Question 13

Coverage that pays benefits, regardless of fault, for medical expense, income loss, and other benefits, resulting from bodily injury to occupants of a covered autp

Answer 13

Personal injury protection (PIP) coverage

Question 14

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured), who caused the loss or is otherwise legally liable for the loss

Answer 14

Subrogation

Question 15

The term referring collectively to insurers and other organizations that make insurance available through a shared risk mechanism to those who cannot obtain coverage in the admitted market

Answer 15

Residual market

Question 16

Plan that allows for lower basic premiums for accident-free driving records and a surcharge for accidents

Answer 16

Safe driver insurance plan (SDIP)

Question 17

Plan for insuring high risk drivers in which all auto insurers doing business in the state are assigned their proportionate share of such drivers based on the total volume of auto insurance written in the state

Answer 17

Automobile insurance plan

Question 18

Organization that designates servicing insurers to handle high risk auto insurance business; all auto insurers in the state are assessed a proportionate share of losses and expenses based on their percentage of the voluntary auto insurance premiums written in the state

Answer 18

Joint underwriting association (JUA)

Question 19

A state wide reinsurance pool to which insurers can assign premiums and losses for high risk drivers; original insurers service the policies, but all insurers in the pool share losses and expenses of the facility in proportion to total auto insurance they write in the state

Answer 19

Reinsurance facility