Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1
Which of the following statements about the liability limits of the PAP is (are) true?
I. The policy can be written with split limits of liability.
II. Prejudgment interest is considered part of the damage award and is subject to the policy limit of liability.
1)

_______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

2
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 even after the limit of liability is exhausted.
2)

_______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

3
All of the following are covered autos under the liability section of the PAP EXCEPT

3)

_______
A)
a trailer owned by the named insured.
 B)
a borrowed auto used by the insured as a substitute for a stolen covered auto.
C)
a nonowned van which is driven by the insured on a regular basis.
D)
a newly acquired auto which replaces a vehicle previously described in the policy.

4
All of the following are insured persons under the liability coverage of the PAP EXCEPT

4)

_______
A)
a relative of the named insured if a member of the same household.
B)
a friend to whom the named insured loans a covered auto.
C)
the employer of the named insured for actions resulting from the named insured's use of a covered auto.
D)
the former spouse of the named insured who moved out of the home 2 years ago when the divorce was finalized.

5
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 friend's auto
5)

_______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

6
All of the following are covered as supplementary payments under the liability section of the PAP EXCEPT

6)

_______
A)
the cost of an appeal bond in a lawsuit stemming from an auto accident.
B)
the cost of a bail bond for a traffic violation when no accident is involved.
C)
reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy.
D)
interest which accrues on a liability judgment covered by the policy.

7
Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally
liable?

7)

_______
A)
The insured injures a pedestrian while operating a friend's new motorcycle.
B)
A friend's suitcase and laptop computer were damaged in an auto accident while the insured and the friend were
vacationing together.
C)
The insured damages a parked car while driving a dump truck for his or her employer.
D)
The insured backs into and damages the garage door of his rented house.

8
What is the purpose of the extended nonowned liability coverage endorsement to the PAP?

8)

_______
A)
to provide liability coverage for an insured who occasionally operates a nonowned auto
B)
to provide liability coverage for an insured's employer when an insured uses his or her auto for business purposes
C)
to provide liability coverage for anyone who loans a covered auto to another driver
D)
to provide liability coverage for an insured who operates a nonowned auto on a regular basis

9
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 the mechanic has an accident while road testing the insured's
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.
9)

_______
A)
I only

B)

II only

C)
both I and II

D)

neither I nor II

1
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 bodily injury. Which of the following statements describes the
situation for Larry while he was in the neighboring state?

10)

______
A)
Larry had only $25,000 of liability coverage.
B)
Larry's policy automatically provided $50,000 of liability coverage.
C)
Larry's policy automatically provided $100,000 of liability coverage.
D)
Larry's policy was suspended while he was in the neighboring state.

1
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 an accident while using Sophie's car and was found to be legally liable
for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy?

11)

______
A)
Sophie's policy will pay $100,000, John's policy will pay $200,000.
B)
Sophie's policy will pay $150,000, John's policy will pay $150,000.
C)
John's policy will pay the entire amount.
D)
Sophie's policy will pay $50,000, John's policy will pay $250,000.

1
Which of the following statements about the medical payments coverage of the PAP is true?

12)

______
A)
The benefit limit applies on a per-accident basis rather than on a per-person basis.
B)
Covered expenses include the cost of funeral services.
C)
Covered expenses must be incurred within 30 days of the accident.
D)
The amount of the benefit typically is $100,000.

1
Which of the following is a covered person under the medical payments coverage of the PAP?

13)

______
A)
a pedestrian struck by the named insured's auto
B)
the named insured while she is operating her car as a taxi
C)
a family member of the named insured if struck by an auto while crossing the street
D)
a carjacker who is involved in an accident after stealing the insured's car

1
Tony has a PAP which provides medical payments coverage. Under which of the following circumstances would the
injured person be eligible for benefits under Tony's policy?
I. A friend in the car is injured while Tony is driving a covered auto.
II. A passenger on a motorcycle driven by Tony is injured when Tony hit another vehicle.
14)

______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

1
In which of the following situations would medical payments be paid under an unendorsed PAP?

15)

______
A)
injuries incurred during the course of employment if workers compensation benefits are available
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 while riding a motorcycle
 1
Which of the following statements about the uninsured motorists coverage of the PAP is true?

16)

______
A)
Unless higher amounts are purchased, the maximum benefit is normally limited to $1,000.
B)
The coverage applies only if the uninsured motorist is legally liable.
C)
A covered person's only recourse is to sue the insurer if there is a disagreement over the amount of damages.
D)
The coverage usually applies only to property damage.

1
Which of the following persons is (are) insured under the uninsured motorists coverage of the PAP?
I. A pedestrian struck by a covered auto if he or she has no insurance to pay medical expenses
II. The spouse of a named insured who is killed by an uninsured motorist
17)

______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

1
All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP
EXCEPT

18)

______
A)
a vehicle owned by an individual who purchased enough liability insurance to satisfy the state's financial responsibility
law.
B)
a vehicle owned by an individual who is insured, but for less than the amount required by the state's financial
responsibility law.
C)
a hit-and-run vehicle, the ownership of which cannot be determined.
D)
a vehicle insured by a company which becomes insolvent before a claim can be paid.
 1
Joyce was injured by an uninsured drunk driver while she was riding in a friend's 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?

19)

______
A)
Each policy will pay $35,000.
B)
Joyce's policy will pay $50,000, and the friend's policy will pay $20,000.
C)
Joyce's policy will pay $50,000, and the friend's policy will pay nothing.
D)
The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.

2
All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT

20)

______
A)
No coverage is provided for newly-acquired vehicles.
B)
Coverage applies to a nonowned auto occasionally driven by an insured.
C)
Coverage may be purchased with or without collision insurance.
D)
Losses are paid regardless of fault.

2
Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP?

21)

______
A)
The covered auto is damaged by a fire after the engine overheated.
B)
The covered auto is damaged when it slid off an icy road and hit a fence.
C)
The covered auto was damaged when the car hit a deer.
D)
The covered auto is vandalized by a thief after it is stolen.

2
John has an auto which is covered for collision losses subject to a $250 deductible. Kate's auto also has collision coverage
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 Kate's car because his car is in the shop for repairs?

22)
______
A)
John's policy will pay $1,750, and Kate's policy will pay nothing.
B)
Kate's policy will pay $1,750, and John's policy will pay nothing.
C)
John's policy will pay $1,500, and Kate's policy will pay nothing.
D)
Kate's policy will pay $1,500, and John's policy will pay $250.

2
All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP EXCEPT

23)

______
A)
destruction of a radar detector which overheated and caught on fire.
B)
damage caused to a car's engine because the named insured never changed the oil.
C)
theft of a compact disc player which was permanently installed in the auto.
D)
vandals damaged a portable cell phone kept in the car.

2
The insurance company's 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.
24)

______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

2
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.
25)
______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

2
In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does
the PAP provide coverage?

26)

______
A)
in Mexico

B)

in Canada
C)
in both Mexico and Canada

D)

anywhere in the world

2
All of the following statements about the termination provisions of the PAP are true EXCEPT

27)

______
A)
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.
B)
The insured can cancel the policy for any reason.
C)
The insurer can cancel a newly-written policy if it has been in force for fewer than 60 days.
D)
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.

2
The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to
28)

______
A)
insure motorcycles, mopeds, motor scooters, and similar vehicles.
B)
provide coverage for when the insured is using someone else's auto with the permission of the owner.
C)
provide coverage for when the insured is using someone else's auto without the permission of the owner.
D)
add coverage for newly-acquired autos.

2
Which of the following statements about the Miscellaneous-Type Vehicle 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.
29)

______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

3
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?
30)

______
A)
bodily injury liability

B)

collision coverage
C)
medical payments coverage
 D)

property damage liability

3
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 damage to Ken's car?
31)

______
A)
bodily injury liability

B)

collision coverage
C)
medical payments coverage

D)

property damage liability

3
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 Ken's medical expenses?
32)

______
A)
bodily injury liability

B)

collision coverage
C)
medical payments coverage

D)

property damage liability

 33)
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 damage to the car that Ken hit?
33)

______
A)
bodily injury liability

B)

collision coverage
C)
medical payments coverage

D)

property damage liability

3
Sarah purchased a Personal Auto Policy with liability limits of 50/100/25. Sarah ran a stop sign and hit a van. The van
sustained $15,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $15,000;
Passenger #2, $60,000; and Passenger #3, $10,000. Sarah sustained $5,000 in medical expenses, and Sarah's car sustained
$10,000 in damages. How much will Sarah's insurer pay under Part A: Liability Coverage?

34)

______
A)
$100,000

B)

$90,000

C)

$125,000

D)

$115,000

3
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?

35)
______
A)
uninsured motorists

B)

underinsured motorists
C)
bodily injury liability

D)

medical payments

3
Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision coverage. Which of the following
losses would be covered under his policy?

36)

______
A)
The new tires Rob had on the car were defective and wore out after 2 months.
B)
Rob wrecked his car while using it as a taxi cab.
C)
A flash flood washed Rob's car off the road and damaged it.
D)
Thieves took Rob's radar detector from his car.

3
Angie was injured when her car was struck by a driver who ran a red light. The other driver carried the minimum liability
coverage necessary to be considered financially responsible. Angie's injuries were $15,000 above the minimum bodily
injury limit. There is a coverage that can be added to the PAP that applies when a negligent driver carries the minimum
liability insurance required by the state, but is less than the insured's actual damages for bodily injury. This coverage is
called

37)

______
A)
underinsured motorists coverage.

B)

bodily injury liability coverage.

C)
medical payments coverage.

D)

uninsured motorists coverage.

3
Dennis was involved in an accident. He believes the damage to his auto is $6,000. His insurer believes the damage is only
$3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the
loss?

38)

______
A)
agreed amount endorsement

B)

coinsurance provision
C)
other insurance provision

D)

appraisal provision

3
The purpose of the collision damage waiver when renting an auto is to

39)

______
A)
waive the insured's deductible if the rented car is damaged or stolen.
B)
relieve the renter of financial responsibility if the rented car is damaged or stolen.
C)
relieve the renter of legal liability to third parties arising out of operation of the rented car.
D)
relieve the renter's insurer of legal liability to third parties arising out of operation of the rented car.

4
Which of the following statements is (are) true with respect to the collision damage waiver on rented cars?
I. It is inexpensive and is provided at no charge by most rental car companies.
II. It waives the renter's liability for bodily injury liability arising out of use of the rented auto.
40)

______
A)
I only

B)

II only

C)

both I and II

D)
neither I nor II

4
The purpose of gap insurance is to

41)

______
A)
pay the difference between the amount the insurer pays if a car is a total loss and the amount owed on a lease or car loan.
B)
pay the difference between the bodily injury liability limit purchased and the actual amount of bodily injury liability if it
exceeds the limit.
C)
pay the difference between the uninsured motorists coverage limit and the actual amount of the medical expenses
incurred by the insured.
D)
pay the difference between the medical payments coverage limit and the actual medical expenses of injured family
members or passengers in the insured auto.

4
A car damaged in an auto accident may have reduced market or resale value after it is repaired. Some insureds have
sought to recover this reduction in market or resale value. This loss in value is called

42)

______
A)
diminution.

B)

betterment.

C)

gap coverage.

D)

subrogation.

4
If the value of a vehicle is increased after repairs, such as repainting an entire auto when only one fender or door is
damaged, the insurer will not pay for the increase in value. Another name for the increase in value is

43)

______
A)
appraisal.

B)

betterment.
 C)

subrogation.

D)

diminution.

4
The 2005 PAP states that the insurer has no duty to provide coverage if the insured fails to comply with certain listed
duties. In practice, however, the insurer is only relieved of its duty to provide coverage if

44)

______
A)
the claim occurred in another state.
B)
failure to comply with the duties is prejudicial to the insurer.
C)
the insured was unaware of the listed duties.
D)
the claim involves bodily injuries of more than $50,000.

4
Which statement concerning towing and labor coverage under the PAP is (are) true?
I. There's no coverage for towing if the auto breaks down—towing is only covered if the auto needs to be towed after a
collision has occurred.
II. Towing and labor coverage pays for repairs at a service station or garage.
45)

______
A)
I only

B)

II only

C)

both I and II

D)

neither I nor II

4
A vehicle is considered a constructive total loss when

46)

______
A)
the repair cost exceeds the actual cash value.
B)
it cannot be repaired.
C)
it can be repaired, but the insurer prefers a cash settlement.
D)
it can be repaired, but the insured prefers a cash settlement.

4
Owen rents an apartment and parks his car in the lot behind the apartment building. A hailstorm occurred one evening,
and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto?

47)

______
A)
uninsured motorists property damage

B)

property damage liability

C)
other-than-collision

D)

collision

4
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?

48)

______
A)
medical payments

B)

bodily injury liability

C)
collision

D)

other-than collision

4
Which of the following statements is true about uninsured motorists coverage under the Personal Auto Policy?

49)

______
A)
Uninsured motorists benefits are limited to the medical expenses of the insured.
B)
The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver.
C)
The benefits are paid without regard to fault.
D)
States require the purchase of uninsured motorists coverage to be able to license an auto.

5
The appraisal provision in the Personal Auto Policy is used to determine the

50)

______
A)
amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree.
B)
amount of auto insurance that should be purchased for an older/antique car.
C)
value of a loss payable under the property damage liability.
D)
value of the loss payable under the medical payments coverage.

5
Dan picked up his friend Rodney to drive to their softball game. Both Dan and Rodney have a Personal Auto Policy (PAP)
with $5,000 of medical payments coverage. Dan hit a parked car, and Rodney was injured, incurring $9,000 of medical
expenses. How will this claim be settled under the other insurance provision of the PAP?

51)

______
A)
Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000.
B)
Dan's insurer will pay $3,000, Rodney's insurer will pay $3,000, and Rodney must pay $3,000 out of his own pocket.
C)
Dan's insurer will pay $4,000 and Rodney's insurer will pay $5,000.
D)
Both insurers will pay $4,500.

1)

C
2)
A
3)
C
4)
D
5)
C
6)
B
7)
D
8)
D
9)
B
10)
B
11)
A
12)
B
13)
C
14)
A
15)
C
16)
B
17)
B
18)
A
19)
D
20)
A
21)
B
22)
D
23)
C
24)
C
25)
A
26)
B
27)
D
28)
A
29)
B
30)
A
31)
B
32)
C
33)
D
34)
B
35)
A
36)
C
37)
A
38)
D
39)
B
40)
D
41)
A
42)
A
43)
B
44)
B
45)
D
46)
A
47)
C
48)
A
49)
B
50)
A
51)
A