PAP Review
Question | Further reading | Correct Answer |
What does the Auto insurance limits of 50/100/25 mean in coverage? | This is a split limit policy. The insurer pays a maximum of $125,000 for combined bodily injury (BI) and property damage (PD) per occurrence. Within that amount, the maximum payment per occurrence is $50,000 for bodily injury liability to one person, $100,000 for bodily injury liability to all persons injured, and $25,000 for property damage. | $50,000 Bodily Injury per person, $100,000 Bodily Injury per occurrence, and $25,000 Property Damage per occurrence |
Which of the following coverages is NOT considered a Supplementary Payment on a Personal Auto Policy (PAP)? | Bodily Injury is included in the insuring agreement and is not considered a supplementary payment. It is in addition to the policy limits. | Bodily Injury |
What is the purpose of the Automobile Assigned Risk Plan? | Most states require auto insurance by law. To provide coverage for drivers unable to obtain insurance normally, states have the Auto Insurance Plan or assigned risk plan. This requires all authorized auto insurers to participate, and high-risk drivers are assigned to them. | Provide coverage for those who are unable to obtain policies through ordinary methods |
In a scenario where you negligently cause an accident resulting in Bodily Injury (BI) and Property Damage (PD) to the maximum of your policy limits, which are 30/60/20, how much will your insurer pay if your defense costs in a resulting lawsuit amount to $8,000? | The maximum amount the insurer will pay is $60,000 for bodily injury (BI), $20,000 for property damage (PD), and the cost of defense which is $8,000 in this example, totaling $88,000. | $88,000 |
Under Coverage D, Damage to Your Auto, which of the following would be covered under Other than Collision? | Collision covers upset of your covered auto, while mechanical breakdown and freezing are excluded. Fire insurance excludes flood, but auto policies cover it under "other than collision" coverage. | Flood |
Who among the following is NOT covered to drive your "covered auto" on your Personal Auto Policy (PAP)? | Under a Personal Auto Policy (PAP), you can loan your car to anyone, and your coverage is primary. However, there is an exclusion for the automobile business. If a mechanic drives your car, they would be covered by the repair shop's Garage Liability policy. | Your auto mechanic test driving your car |
Which statement is NOT true regarding Transportation Expenses on a PAP? | The coverage for transportation expenses is $20 a day, up to a maximum of $600. It applies starting 48 hours after the total theft of your car or if your car is withdrawn from use for more than 24 hours due to a covered physical damage loss. Transportation Expenses coverage has no deductible. | A deductible applies |
Which statement is NOT true regarding Medical Payments coverage on a PAP? | Medical coverage is a no-fault type that covers you and your passengers. It also covers you while working on your car and as a pedestrian. If you have health insurance in addition to auto medical coverage, your auto medical coverage pays first, and then your health insurance takes over. | Coverage is to others, not you |
Which of the following is considered a Collision loss under a Personal Auto Policy (PAP)? | If another driver dents your car and drives off, it is considered a collision loss. If you can identify the at-fault party, you can turn the claim into their insurer under their property damage liability. | Your vehicle is struck by another vehicle causnig a dent, and the driver leaves the scene |
Which classifications are used by insurance companies to set rates for Auto policies based on the Law of Large Numbers? | Occupation does not affect auto rates unless you use your car in business, such as being a real estate agent. Credit history is not a factor. Rating factors include age, gender, and location. In general, larger cities have higher rates, which is the opposite of fire insurance. | Age, gender, and location |
What does Uninsured Motorist coverage typically cover? | Uninsured Motorist coverage provides coverage if you are injured by another driver who either has no insurance or whose coverage does not meet the minimum requirements in the state. Hit and run drivers are also considered uninsured motorists. Uninsured Motorist coverage usually covers injury only, not damage to your car. | Covers injuries caused by hit-and-run drivers |
Under the Coverage D - Physical Damage section of the Personal Auto Policy, when are Transportation Expenses provided? | Assuming you have physical damage coverage on your Personal Auto Policy (PAP), transportation expenses are covered up to $20 a day (maximum $600) without a deductible if your covered auto is stolen or damaged due to collision or other than collision. There is a 48-hour waiting period for theft and a 24-hour waiting period for other covered losses. | Either Stolen and Damaged |
Which of the following would NOT be protected by the Medical Payments section of your Auto policy? | Persons in the other car that you negligently injure are covered under your Bodily Injury (BI) liability coverage. | Persons in an auto with which you have collided |
What is NOT true about an Assigned Risk Auto plan? | The Auto Insurance Plan is primarily designed to cover individuals who cannot find auto insurance through normal channels. In this state, it is seldom used due to the availability of high-risk auto insurers specializing in coverage for individuals with poor driving records. | It provides insurance to those who cannot afford it in the normal market |
Which coverage may be included in a Personal Auto Policy without the need for an Endorsement? | If you have Other Than Collision coverage on your car, transportation expenses are automatically included. However, towing and labor, extended non-owned coverage, and named non-owner coverage must be added by endorsement for an additional premium. | Transportation Expenses |
In which situation would Liability insurance under a Personal Auto Policy provide coverage? | Motorcycles are not covered by a Personal Auto Policy (PAP). Taxis (except car pools) and using an auto in the automobile business are excluded. However, property damage caused by your car to a rented garage is covered. | Insured who rents a private garage backs in and damages the garage |
Under the Supplementary Payments of a Personal Auto Policy, how much will the policy pay per day for loss of earnings if the insured takes time off work to attend a hearing or trial related to a covered accident? | Supplementary payments on a Personal Auto Policy (PAP) include coverage for the cost of bail bonds required due to an accident, premiums on appeal bonds, post-judgment interest, and loss of earnings up to $200 a day for attendance at hearings or trials at the insurer's request. These payments are in addition to the policy limits. | $200 a day for loss of earnings |
Which accident would NOT be covered under the Uninsured Motorists coverage of your Personal Auto Policy? | If an at-fault party injures you with their car for an amount of $25,000, and their policy has the minimum required limits of $15,000/$30,000, their policy will only pay up to their limits for your injuries. If you carried optional underinsured motorist coverage on your policy, you may be able to sue them for the remaining $10,000. | An accident with a driver who carries the minimum Liability limits required by law, but whose insurance is not adequate to cover the damages |
Who determines the rates for the Automobile Assigned Risk Plan? | Each authorized auto insurer is required to participate in the Automobile Insurance Plan, but they can set their own rates as filed with the Insurance Department. | Participating carriers |
What is NOT considered a Collision loss under a Personal Auto Policy? | Colliding with a bird or animal is considered Other Than Collision, not collision. This is because it is considered an unavoidable accident, and insurers cover it under Other Than Collision, which often has a lower deductible than collision coverage. | Impact between a large animal and the covered auto |
What does Underinsured Motorists coverage typically cover? | Underinsured Motorist coverage may be optional, but it must be offered to the insured when the policy is issued. If the insured rejects it, they must do so in writing. Underinsured Motorist coverage covers situations where someone negligently injures you with their car, but their limits are inadequate. In such cases, you can turn the claim into your own insurer under Underinsured Motorist coverage. | When your covered auto collides with another car and their coverage is inadequate |
Which statement is NOT true regarding Towing and Labor coverage on a PAP? | Towing and labor coverage is an optional coverage that can be purchased for an additional premium. | It is Supplementary Payment under Part D |
Which statement is NOT true about the Appraisal clause under Part D of a PAP? | The cost of appraisal is shared between the parties involved. The insurer pays for their appraiser, and the insured pays for their appraiser. The cost of a neutral third party (umpire) is shared by both parties. | Expenses of the appraisal are charged to the party who demanded it |
What are the limits for Transportation Expenses coverage under a PAP? | This has been previously discussed. | $20 a day, up to a maximum of $600 |
What is the most likely course of action for a real-estate agent who drives customers around in her own car? | A commercial or business auto policy is used when a vehicle is used for pick-up and delivery purposes, such as a florist's van. Real estate agents who use their personal autos for business purposes can be covered by a Personal Auto Policy (PAP), but they will be charged a business usage rate based on the number of miles driven. | Add Business Use to her Personal Auto Policy |
You are injured in an accident caused by another driver whose insurance does not cover all your injuries and damages. Your policy includes Underinsured Motorists (UIM) coverage. What happens next? | If you are injured in an accident caused by another driver whose insurance does not cover all your injuries and damages, your Underinsured Motorists (UIM) coverage comes into play. After the other driver's limits are exhausted, your own insurer will pay the remainder up to the limits of your policy. | After the other driver's limits are exhausted, your company pays the remainder up to the limits of your policy |
Who is the Named Nonowner coverage endorsement used for? | A named non-owner policy endorsement provides liability-only coverage for someone who does not own a car but may drive borrowed or rented cars. For example, if you don't own a car and borrow someone else's car, their coverage is primary, but if they don't have coverage, your named non-owner policy will cover you while driving their car. | Someone who does not own an automobile but drives borrowed or rented autos |
If a friend borrows your car and causes an accident while driving it, whose insurance applies? | The owner's auto policy is always primary, and the driver's auto policy is excess. | Your policy applies first and hers applies to any excess |
Which of the following scenarios is NOT excluded from coverage under a PAP? | No one is covered using your car without your permission, except for your family members. Taxis are excluded and would require a business auto policy, and you are not covered while driving a non-owned auto provided for your regular use. | Your teenager who takes you car without permission |
Where would coverage not apply under a PAP when driving outside your own state? | The coverage territory on a Personal Auto Policy (PAP) includes the USA, its territories or possessions, Puerto Rico, or Canada. | Mexico |
On a PAP, which coverage does a deductible apply to? | Liability coverage usually does not have a deductible. Damage to your auto, including both collision and other than collision, will pay the Actual Cash Value (ACV) of your car minus the deductible. A higher deductible results in a lower premium. | Damage to Your Auto |
What does your insurance company pay for if your fully insured car is hit by an uninsured motorist? | Uninsured Motorist (UM) coverage usually does not cover property damage. If you sustain injuries, they would be covered under UM, but damage to your car would need to be filed under Part D - Damage to Your Auto coverage, specifically under Collision coverage. | Pays your BI under your Uninsured Motorists and your PD under your Part D, Damage to Your Auto |
Which of the following is NOT an optional endorsement for the PAP? | Transportation expenses are automatically included if you have Part D (Physical Damage) coverage. Joint ownership coverage is an endorsement that provides coverage for an auto owned by two or more relatives (excluding husband and wife) or owned by unrelated individuals living together. It creates insurable interest for both parties. | Transportation Expenses |
Which of the following situations would NOT be covered by the Liability part of your PAP, besides any vehicle listed on the Declarations Page? | Due to their size and weight, most motor homes require a special policy for insurance coverage. However, small vans and travel trailers can be covered under a Personal Auto Policy (PAP). | Purchasing a motor home during the Policy Period and requesting the insurer to add it to the policy |
Which of the following statements is NOT true regarding the minimum Auto coverage represented by 15/30/10 under the State Financial Responsibility Law? | The per-person limit for Bodily Injury (BI) coverage is $15,000. Therefore, if someone's injuries amount to $20,000, they would only be covered up to $15,000. The remaining $5,000 would need to be paid out of pocket. | If you injured two persons, resulting in claims of $10,000 and $20,000 for the same occurrence, the insurer would pay out $30,000 |
Which of the following is NOT defined as a trailer under a PAP? | Semi-trailers are covered under a Business Auto policy. On a Personal Auto Policy (PAP), the other options are covered. It's important to note that there is no additional premium charged to cover liability for trailers since they cannot go anywhere the car doesn't go. However, for physical damage coverage, an additional premium is charged based on the trailer's value. | A semi-trailer |
If your PAP has UIM limits of $50/$100 and you sustain bodily injury of $40,000 caused by another party with PAP BI limits of $15/$30, how much can you recover from your UIM coverage? | If the negligent party's Bodily Injury (BI) liability coverage pays you $15,000 (their per-person limit), and you have Underinsured Motorist (UIM) limits of $50,000/$100,000 on your own policy, your UIM coverage can pay the remaining $25,000 of your $40,000 injury after the other party's coverage is exhausted. | $25,000 |