Exam 3 - Principles of Insurance review pt. 3

All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT

A) 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 vehicles.

D) No coverage is provided for newly-acquired vehicles.

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 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.

C) The covered auto is damaged when it slid off an icy road and hit a fence.

All of the following statements about the termination provisions of the PAP are true EXCEPT

A) 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 insurer 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.

C) The insurer can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations.

Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings?

A) medical payments
B) uninsured motorists
C) underinsured motorists
D) bodily injury liability

B) uninsured motorists

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 other car suffered $30,000 in bodily injuries.
—Ken's car sustained $5,000 in damages.
—Ken incurred $5,000 in medical expenses.
—The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses?

A) bodily injury liability
B) collision coverage
C) medical payments coverage
D) property damage liability

A) bodily injury liability

Kelly was hit by a car while she was walking to the park. She incurred $750 in medical costs at a hospital emergency room. Kelly has coverage for this charge under which of her Personal Auto Policy (PAP) coverages?

A) bodily injury liability
B) other-than collision
C) medical payments
D) collision

C) medical payments

After the Personal Auto Policy has been in force for 60 days (or is a renewal policy), all of the following are grounds for the insurer to cancel the policy EXCEPT

A) nonpayment of premiums
B) the insured's license to drive is suspended
C) the insurer discovers material misrepresentation by the insured in the application process
D) the insured received a traffic ticket

D) the insured received a traffic ticket

All of the following are covered under the dwelling coverage (Coverage A) under the homeowners policy EXCEPT

A) any structure attached to the dwelling.
B) the land on which the insured dwelling is located.
C) materials and supplies intended for alteration or repair of the dwelling

B) the land on which the insured dwelling is located.

Which of the following statements about coverage for loss of use (Coverage D) under the homeowners policy is true?

A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss.
B) The duration of payments for additional living expenses is limited to a maximum of 30 days.
C) There is no coverage for loss of rent if an insured peril makes the part of the premises rented to others uninhabitable.
D) There is coverage for loss of business income if an insured peril forces a home business to be terminated.

A) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss.

Which of the following is a covered peril under the personal property coverage (Coverage C) of an unendorsed Homeowners policy?

A) earthquake
B) nuclear radiation
C) windstorm
D) flood

C) windstorm

Linda wants to purchase a homeowners policy. She has some valuable personal property to which internal policy limits apply. Her agent said that she could obtain coverage under her homeowners policy by attaching a list of this valuable property with specific amounts of insurance. Such a listing is called a(n)

A) binder.
B) schedule.
C) application.
D) warranty

B) schedule.

If there is a conflict between state law and a provision in a homeowners policy,

A) the policy wording takes precedence.
B) the state law takes precedence.
C) the policyholder is entitled to whichever provides broader coverage.
D) the policy is null and void.

B) the state law takes precedence.

All of the following persons are insured for personal liability under the homeowners policy EXCEPT

A) children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere.
B) foster children under the age of 21 who reside with the named insured.
C) nonresident employees of the named insured.
D) the spouse of the named insured if a resident of the same household.

C) nonresident employees of the named insured.

Which of the following persons is (are) eligible for benefits under medical payments to others (Coverage F) of the homeowners policy?
I. A friend who slips and falls on a wet patio while visiting the named insured II. A neighborhood child who is severely scratched by a cat in the care of the named insured

A) I only
B) II only
C) both I and II
D) neither I nor II

C) both I and II

Jane would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT

A) raising the deductible in the homeowners policy to a higher amount.
B) shopping around a homeowners policy.
C) installing burglar alarms, smoke detectors, and dead-bolt locks.
D) adding a personal property replacement cost endorsement.

D) adding a personal property replacement cost endorsement.

The primary function of an actuary is to

A) adjust claims.
B) determine premium rates.
C) negotiate reinsurance treaties.
D) invest insurance company assets.

B) determine premium rates.