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1、Principles of Risk Management and Insurance, 11e (Rejda)Chapter 22 Auto Insurance1) Which of the following statements about the liability limits of the PAP is (are) true?I.The policy is written with split limits of liability.II.Prejudgment interest is considered part of the damage award and is subje
2、ct to the policy limit of liability.A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: CQuestion Status: Previous Edition2) Which of the following statements about the payment of defense costs by the PAP is (are) true?I.They are paid in addition to the policy limits.II.They are payable ev
3、en after the limit of liability is exhausted.A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: AQuestion Status: Previous Edition3) All of the following are covered autos under the liability section of the PAP EXCEPTA) a nonowned van which is driven by the insured on a regular basis.B) a
4、 trailer owned by the named insured.C) a borrowed auto used by the insured as a substitute for a stolen covered auto.D) a newly acquired auto which replaces a vehicle previously described in the policy.Answer: AQuestion Status: Previous Edition4) All of the following are insured persons under the li
5、ability coverage of the PAP EXCEPTA) a friend to whom the named insured loans a covered auto.B) the employer of the named insured for actions resulting from the named insureds use of a covered auto.C) the former spouse of the named insured who moved out of the home 2 years ago when the divorce was f
6、inalized.D) a relative of the named insured if a member of the same household.Answer: CQuestion Status: Previous Edition5) Which of the following persons is (are) covered for liability insurance under the PAP?I.A family member who drives a covered auto.II.A family member who occasionally drives a fr
7、iends auto.A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: CQuestion Status: Previous Edition6) All of the following are covered as supplementary payments under the liability section of the PAP EXCEPTA) the cost of an appeal bond in a lawsuit stemming from an auto accident.B) the cost
8、of a bail bond for a traffic violation when no accident is involved.C) interest which accrues on a liability judgment covered by the policy.D) reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy.Answer: BQuestion Status: Revised7) Which of the
9、following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable?A) The insured injures a pedestrian while operating a friends new motorcycle.B) The insured backs into and damages the garage door of his rented house.C) A friends suitcase and laptop
10、 computer were damaged in an auto accident while the insured and the friend were vacationing together.D) The insured damages a parked car while driving a dump truck for his or her employer.Answer: BQuestion Status: Previous Edition8) What is the purpose of the extended nonowned liability coverage en
11、dorsement to the PAP?A) to provide liability coverage for an insureds employer when an insured uses his or her auto for business purposesB) to provide liability coverage for an insured who occasionally operates a nonowned autoC) to provide liability coverage for anyone who loans a covered auto to an
12、other driverD) to provide liability coverage for an insured who operates a nonowned auto on a regular basisAnswer: DQuestion Status: Previous Edition9) Which of the following situations would be covered under the liability section of the PAP?I.A mechanic is sued by a pedestrian who is injured when t
13、he mechanic has an accident while road testing the insureds auto. II.The daughter of the named insured is sued after she has an accident when a new friend she just met at a campus hangout lets her drive his car.A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: BQuestion Status: Previous
14、Edition10) Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bo
15、dily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state?A) Larrys policy was suspended while he was in the neighboring state.B) Larry had only $25,000 of liability coverage.C) Larrys policy automatically provided $50,000 of liability cov
16、erage.D) Larrys policy automatically provided $100,000 of liability coverage.Answer: CQuestion Status: Previous Edition11) John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of 100/300/50. John also has a PAP, and his liability limits 250/500/50. John had
17、 an accident while using Sophies car and was found to be legally liable for $300,000 in bodily injury liability. How much will be paid by each policy?A) Sophies policy will pay $150,000, Johns policy will pay $150,000.B) Sophies policy will pay $50,000, Johns policy will pay $250,000.C) Sophies poli
18、cy will pay $100,000, Johns policy will pay $200,000.D) Johns policy will pay the entire amount.Answer: CQuestion Status: Previous Edition12) Which of the following statements about the medical payments coverage of the PAP is true?A) The amount of the benefit typically is $100,000.B) Covered expense
19、s must be incurred within 6 months of the accident.C) Covered expenses include the cost of funeral services.D) The benefit limit applies on a per-accident basis rather than on a per-person basis.Answer: CQuestion Status: Previous Edition13) All of the following are covered persons under the medical
20、payments coverage of the PAP EXCEPTA) a family member of the named insured if struck by an auto while crossing the street.B) a pedestrian struck by the named insureds auto.C) the named insured who is injured while occupying a friends auto.D) a friend who is injured while occupying the named insureds
21、 auto.Answer: BQuestion Status: Previous Edition14) Tony has a PAP which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tonys policy?I.A friend in the car is injured while Tony is driving a covered auto.II.A pass
22、enger on a motorcycle driven by Tony is injured when Tony hit another vehicle. A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: AQuestion Status: Previous Edition15) All of the following are exclusions under the medical payments coverage of the PAP EXCEPTA) injuries incurred while ridin
23、g a motorcycle.B) injuries incurred while an auto is being used without the presumption that permission would have been granted to use the auto.C) injuries incurred in an auto while it is used in a share-the-expense car pool.D) injuries incurred during the course of employment if workers compensatio
24、n benefits are available.Answer: CQuestion Status: Previous Edition16) Which of the following statements about the uninsured motorists coverage of the PAP is true?A) The coverage usually applies only to property damage.B) The coverage applies only if the uninsured motorist is legally liable.C) Unles
25、s higher amounts are purchased, the maximum benefit is normally limited to $1,000.D) A covered persons only recourse is to sue the insurer if there is a disagreement over the amount of damages.Answer: BQuestion Status: Previous Edition17) Which of the following persons is (are) insured under the uni
26、nsured motorists coverage of the PAP?I.A pedestrian struck by a covered auto if he or she has no insurance to pay medical expensesII.The spouse of a named insured who is killed by an uninsured motoristA) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: BQuestion Status: Previous Edition18)
27、 All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP EXCEPTA) a vehicle owned by an individual who is insured, but for less than the amount required by the states financial responsibility law.B) a hit-and-run vehicle, the ownership
28、 of which cannot be determined.C) a vehicle owned by an individual who purchased enough enough liability insurance to satisfy the states financial responsibility law. D) a vehicle insured by a company which becomes insolvent before a claim can be paid.Answer: CQuestion Status: Previous Edition19) Jo
29、yce was injured by an uninsured drunk driver while she was riding in a friends car. Joyce and her friend each have a PAP with an uninsured motorists limit of $50,000. How much will be paid by each policy if it is determined that Joyce has $70,000 of bodily injuries?A) Each policy will pay $35,000.B)
30、 Joyces policy will pay $50,000, and the friends policy will pay nothing.C) Joyces policy will pay $50,000, and the friends policy will pay $20,000.D) The friends policy will pay $50,000, and Joyces policy will pay $20,000.Answer: DQuestion Status: Previous Edition20) All of the following statements
31、 about Part D (coverage for damage to your auto) of the PAP are true EXCEPTA) Coverage may be purchased with or without collision insurance.B) Losses are paid regardless of fault.C) Coverage applies to a nonowned auto occasionally driven by an insured.D) No coverage is provided for newly-acquired ve
32、hicles. Answer: DQuestion Status: Previous Edition21) Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP?A) The covered auto was damaged when the car hit a deer. B) The covered auto is vandalized by a thief after it is stolen.C) The
33、 covered auto is damaged when it slid off an icy road and hit a fence.D) The covered auto is damaged by a fire after the engine overheated. Answer: CQuestion Status: Revised22) John has an auto which is covered for collision losses subject to a $250 deductible. Kates auto also has collision coverage
34、 but her deductible is $500. Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kates car because his car is in the shop for repairs?A) Johns policy will pay $1,500, and Kates policy will pay nothing.B) Johns policy will pay $1,750, an
35、d Kates policy will pay nothing.C) Kates policy will pay $1,750, and Johns policy will pay nothing.D) Kates policy will pay $1,500, and Johns policy will pay $250.Answer: DQuestion Status: Previous Edition23) All of the following losses are excluded under Part D (coverage for damage to your auto) of
36、 an unendorsed PAP EXCEPTA) vandals damaged a portable cell phone kept in the car.B) theft of a compact disc player which was permanently installed in the auto.C) damage caused to a cars engine because the named insured never changed the oil. D) destruction of a radar detector which overheated and c
37、aught on fire.Answer: BQuestion Status: Previous Edition24) The insurance companys options for settling a collision loss to a covered auto under the PAP include which of the following?I.Pay the loss in money.II.Repair or replace the damaged auto.A) I onlyB) II onlyC) both I and IID) neither I nor II
38、Answer: CQuestion Status: Previous Edition25) Duties of an insured after a collision loss covered under the PAP include which of the following?I.Take reasonable steps to protect the vehicle from further damage.II.Admit fault if the insured believes he or she caused the collision.A) I onlyB) II onlyC
39、) both I and IID) neither I nor IIAnswer: AQuestion Status: Previous Edition26) In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does the PAP provide coverage?A) in MexicoB) in CanadaC) in both Mexico and CanadaD) anywhere in the wo
40、rldAnswer: BQuestion Status: Previous Edition27) All of the following statements about the termination provisions of the PAP are true EXCEPTA) The insured can cancel the policy for any reason.B) The insurer can cancel a newly-written policy if it has been in force for fewer than 60 days.C) The insur
41、er can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations.D) The insurer can refuse to renew the policy at its annual anniversary date as long as proper notice is given prior to the end of the policy period.Answer: CQuestion Status: Prev
42、ious Edition28) The Miscellaneous-Type Vehicle Endorsement to the PAP can be used to insure all of the following vehicles EXCEPTA) motor homes.B) golf carts.C) snowmobiles.D) motorcycles.Answer: CQuestion Status: Previous Edition29) Which of the following statements about the Miscellaneous-Type Vehi
43、cle Endorsement to the PAP is (are) true?I.It provides bodily injury liability coverage for any vehicle rented by the insured.II.To lower premiums when a motorcycle is insured, bodily injury to passengers can be excluded.A) I onlyB) II onlyC) both I and IID) neither I nor IIAnswer: BQuestion Status:
44、 Previous Edition30) Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred:The driver of the
45、 other car suffered $30,000 in bodily injuries.Kens car sustained $5,000 in damages.Ken incurred $5,000 in medical expenses.The car that Ken hit was a total loss.Which of Kens Personal Auto Policy (PAP) coverages will cover the other drivers medical expenses?A) bodily injury liabilityB) collision co
46、verageC) medical payments coverageD) property damage liabilityAnswer: AQuestion Status: Previous Edition31) Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a ca
47、r approaching from the other direction. The following losses occurred.The driver of the other car suffered $30,000 in bodily injuries.Kens car sustained $5,000 in damages.Ken incurred $5,000 in medical expenses.The car that Ken hit was a total loss.Which of Kens Personal Auto Policy (PAP) coverages will cover the damage to Kens car?A) bodily injury liabilityB) collision coverageC) medical payments coverageD) property damage liabilityAnswer: BQuestion Status: Previous Edition32) Ken purchased a PAP wit