Property & Casualty Insurance License Test Personal Automobile Policies Questions and Answers 1 — Questions and Answers
Question 1: An insured with a standard Personal Auto Policy (PAP) uses their vehicle to transport passengers for a fee through a popular ride-sharing service. While logged into the app and awaiting a passenger, they negligently cause an accident. How will the Liability coverage (Part A) of their PAP typically respond?
- The claim will be denied due to the livery conveyance exclusion. (Correct answer)
- The policy will provide full liability coverage for the damages.
- Coverage will be provided, but only on an excess basis after the ride-sharing company's insurance pays.
- The policy will cover the damages, but a special, higher deductible will apply.
Correct answer: The claim will be denied due to the livery conveyance exclusion.
Standard Personal Auto Policies contain a "livery conveyance" exclusion, which specifies that coverage is not provided while the insured vehicle is being used to transport people or property for a fee. Driving for a ride-sharing service falls under this exclusion.
Question 2: Which of the following losses to an insured's vehicle would be covered under Part D - Damage to Your Auto, specifically by Other Than Collision (Comprehensive) coverage?
- The vehicle rolls over after skidding on a patch of ice.
- The vehicle is damaged when it strikes a deer that runs into the road. (Correct answer)
- The vehicle's bumper is dented by a driver who backs into it in a parking lot and leaves the scene.
- The vehicle is damaged when the insured misjudges a turn and hits a utility pole.
Correct answer: The vehicle is damaged when it strikes a deer that runs into the road.
Other Than Collision, also known as Comprehensive coverage, pays for direct and accidental losses to the covered auto from perils other than collision. Perils specifically listed as 'other than collision' include fire, theft, windstorm, hail, and contact with a bird or animal. The other options describe collision events.
Question 3: An insured, who has a Personal Auto Policy (PAP) with Medical Payments coverage, is injured when they are struck by a car while jogging. How does their Medical Payments coverage apply to their injuries?
- It will not apply because the insured was not occupying a vehicle at the time of the accident.
- It will apply only if the driver of the car that struck them was uninsured.
- It will pay for reasonable and necessary medical expenses, regardless of who was at fault for the accident. (Correct answer)
- It will only pay for expenses that are not covered by the insured's health insurance policy.
Correct answer: It will pay for reasonable and necessary medical expenses, regardless of who was at fault for the accident.
Medical Payments coverage is a no-fault coverage that applies to the named insured and family members if they are injured while occupying a motor vehicle OR as a pedestrian when struck by a motor vehicle. It pays for reasonable medical expenses without regard to fault.
Question 4: An insured carries a Personal Auto Policy (PAP). They give their friend, who also has a PAP, permission to borrow their car. The friend causes an at-fault accident. How will the liability coverages of the two policies respond to the third-party claim?
- The driver's policy is primary, and the car owner's policy is excess.
- The car owner's policy is primary, and the driver's policy is excess. (Correct answer)
- Both policies will share the loss on a pro-rata basis based on their liability limits.
- Only the car owner's policy will respond to the claim; the driver's policy provides no coverage.
Correct answer: The car owner's policy is primary, and the driver's policy is excess.
The general rule in auto insurance is that the insurance follows the car. Therefore, the policy covering the vehicle involved in the accident is considered the primary source of liability coverage. The at-fault driver's policy is considered excess and would only apply after the primary policy's limits are exhausted.
Question 5: What is the primary function of Part C - Uninsured Motorist (UM) Coverage in a Personal Auto Policy?
- To pay for property damage to the at-fault driver's vehicle.
- To cover the insured's bodily injury expenses caused by an at-fault driver who lacks liability insurance. (Correct answer)
- To provide liability coverage for the insured if they are driving a vehicle they do not own.
- To pay for the insured's medical expenses regardless of fault, similar to Medical Payments coverage.
Correct answer: To cover the insured's bodily injury expenses caused by an at-fault driver who lacks liability insurance.
Uninsured Motorist (UM) coverage is designed to protect the insured for their own bodily injuries when they are in an accident caused by an at-fault driver who has no liability insurance, is a hit-and-run driver, or whose insurer is insolvent.
Question 6: An insured drives their personal vehicle from Arizona into Mexico for a weekend vacation. While in Mexico, they cause an accident resulting in property damage and bodily injury to others. How will their standard, unendorsed US Personal Auto Policy respond?
- The policy will provide coverage, but the limits will be reduced to the minimum required by Mexican law.
- The claim will be covered in full, just as if the accident had occurred in the United States.
- The claim will be denied because the standard policy territory does not include Mexico. (Correct answer)
- The policy will cover the property damage but exclude the bodily injury.
Correct answer: The claim will be denied because the standard policy territory does not include Mexico.
The policy territory for a standard Personal Auto Policy is limited to the United States, its territories and possessions, Puerto Rico, and Canada. To be covered while driving in Mexico, the insured must purchase a separate policy from a licensed Mexican insurer or add a specific, limited endorsement to their US policy, which is not standard.
Property & Casualty Insurance License Test Personal Automobile Policies Questions and Answers 1
An insured with a standard Personal Auto Policy (PAP) uses their vehicle to transport passengers for a fee through a popular ride-sharing service.
While logged into the app and awaiting a passenger, they negligently cause an accident.
How will the Liability coverage (Part A) of their PAP typically respond?