Deck 14: Multirisk Management Contracts: Auto

Question 1

Opponents of no-fault assert that many people who favor no-fault do so primarily because they expect it will be cheaper than the present system.

Answer 1

True

Question 2

Like in homeowner's policy, intentionally caused (nonfortuitous) harm is always excluded in automobile insurance.

Answer 2

True

Question 3

When a negligent driver meets the legal insurance requirements but is legally responsible for additional amounts, the driver is not an uninsured motorist.

Answer 3

True

Question 4

Financial responsibility laws do not have any effect on the percentage of drivers with auto liability insurance.

Question 5

The JUA differs from an auto insurance plan in that only designated servicing carriers can issue coverage to participants.

Question 6

Every type of nonexcluded loss-causing event other than collision is considered comprehensive.

Question 7

Under the no-fault concept, first-party benefits such as PIP are provided with regard to fault as a way to encourage legal battles.

Question 8

Under modified no-fault laws, only no-fault benefits are available for nonserious injuries resulting in losses below the threshold.

Question 9

In add-on plans, rights to litigate are not affected.

Question 10

Coverage applies for accidents arising out of ownership, maintenance, or use of a motor vehicle you own or have available for regular use even if it is not a declared auto in the declarations section of the policy.

Question 11

In the event of a loss while you are driving a friend's car, your friend's insurance is primary coverage, or the first payee in a situation where two or more coverages apply, and your insurance is excess coverage.

Question 12

A passenger in your car who is injured can recover under both liability and medical payments coverages for the same losses.

Question 13

In add-on plans, auto plans do not limit rights to litigate and do not require that insurers offer first-party coverage similar to what is available in no-fault states.

Question 14

The limit of liability for medical payments is on a per person basis, such as $5,000 per person.This is the maximum limit of liability for each person injured in any one accident.If you have two autos insured, with a medical payments limit for each shown on the declarations page, you cannot stack the limits together.

Question 15

The substandard market is created by state law.

Question 16

The insurer does not have the right to settle claims without the insured's approval even if it finds this expedient.

Question 17

Uninsured motorists coverage does not pay for bodily injuries caused by an accident with another vehicle whose driver is negligent and whose insurance company is insolvent.

Question 18

Family health insurance company is broader than medical payments coverage of PAP.

Question 19

Maryland State Fund is a government-operated residual market company that provides coverage to drivers who cannot obtain insurance through the regular market.

Question 20

Auto insurance plans have provided significant profits to the auto insurance industry because of generally higher rates than those found in the voluntary market.

Question 21

In states that adopted modified no-fault laws, there are two types of modification.This modification has a financial limit under which no fault is assigned.When the claim is over this amount, the at-fault system kicks in.Identify this type of modified no-fault.

A)Pure threshold
B)Affirmative threshold
C)Monetary threshold
D)Add-on threshold
E)Verbal threshold

Question 22

Bankruptcy or insolvency of a covered person shall relieve the insurer of any obligations under the policy.

Question 23

Identify the law that requires automobile registrants to have specified liability insurance in effect at all times.

A)Financial responsibility law
B)Tort law
C)Pure no-fault law
D)Modified no-fault law
E)Compulsory auto liability insurance law

Question 24

Which of the following statements is true about no-fault laws?

A)Under these laws, benefits are provided by insurers with regard to who caused the accident.
B)Under this concept, first-party benefits such as PIP are provided with regard to fault as a way to encourage legal battles.
C)According to this concept, in a multi-car accident, each injured party would receive compensation from his or her own insurance company.
D)Under this concept, it would be mandatory to expend resources in determining fault.
E)These laws are uniform.

Question 25

Many states have funds to provide compensation in situations when an injured motorist obtains a judgment against the party at fault but cannot collect because the party has neither insurance nor resources.Identify these funds.

A)Financial responsibility fund
B)Title defect fund
C)No-fault fund
D)Monetary threshold fund
E)Unsatisfied judgment fund

Question 26

Identify the law that acts to induce motorists to buy auto liability insurance so victims of their negligence will receive compensation.

A)Financial responsibility law
B)Tort law
C)Pure no-fault law
D)Modified no-fault law
E)Compulsory auto liability insurance law

Question 27

Identify the category of no-fault law that exists only theoretically and would abolish completely the opportunity to litigate over automobile accidents.

A)Add-on no-fault
B)Modified no-fault
C)Threshold no-fault
D)Pure no-fault
E)Tort no-fault

Question 28

Interest in no-fault grew from the belief that:

A)rights to litigate should be limited but not eliminated.
B)there should be a monetary limit under which no-fault should be assigned.
C)legal battles regarding compensation for accident injuries should be encouraged.
D)the tort system is slow and erratic in its results.
E)insurance companies should not get involved in legal battles between parties involved in accidents.

Question 29

Under these plans, drivers who cannot buy auto liability insurance through the usual channels can apply to be assigned to an insurer who must sell them coverage that meets the requirements of the financial responsibility law.Identify these plans.

A)Add-on plans
B)Affirmative plans
C)Auto insurance plans
D)Unsatisfied judgment plans
E)Financial responsibility plans

Question 30

If you were involved in a multicar accident where tort law applied, a lawsuit between the parties likely would result.The suit would be an attempt to place blame for the accident, thereby also placing financial responsibility for the losses incurred.Under the no-fault concept:

A)each injured party would receive compensation from his or her own insurance company.
B)the insurance company of the party at fault would have to compensate for all injured parties.
C)each injured party would receive compensation from the insurance company of the party who cause the injury.
D)the party who is driving under influence would have to bear all damages.
E)each injured party would bear their injury costs, since the insurance company would not get involved to avoid legal battles.

Question 31

A typical law requires evidence of this responsibility when a driver is involved in an accident or is convicted of a specified offense, such as driving while intoxicated.The simplest way to prove such responsibility is to have an auto liability insurance policy with specified limits that meet or exceed the minimum limits set by various state legislatures.Identify this responsibility.

A)Add-on responsibility
B)Tort responsibility
C)Financial responsibility
D)Modified no-fault responsibility
E)Pure no-fault responsibility

Question 32

This market is created by state law and exists to provide auto insurance to people who cannot buy it through the usual channels.Identify this market.

A)Residual market
B)Unshared market
C)Reinsurance market
D)Substandard market
E)Voluntary market

Question 33

The miscellaneous type vehicle endorsement can be used to provide all the coverages of the PAP, including liability, medical payments, uninsured motorists, and physical damage coverage.

Question 34

Proposition 103 requires insurers to set prices primarily based on driving record, years of driving experience, and annual miles driven.

Question 35

In states that adopted modified no-fault laws, there are two types of modification.The _____ threshold describes the types of injuries for which the party at fault is considered liable, as in Florida, Michigan, New Jersey, New York, and Pennsylvania.

A)pure
B)affirmative
C)monetary
D)add-on
E)verbal

Question 36

Some drivers cannot buy insurance through the usual channels because, as a group, their losses are excessive.This problem can be solved by charging higher premium rates for such drivers, as is the case of insurers providing coverage to this market, in which some companies offer limited auto coverage to high-risk drivers at high premium rates.Identify the market.

A)Residual market
B)Shared market
C)Reinsurance market
D)Substandard market
E)Voluntary market

Question 37

Auto plans that offer compensation to an injured motorist through the individual's own insurer are called:

A)verbal threshold plans.
B)add-on plans.
C)modified no-fault plans.
D)pure no-fault plans.
E)monetary threshold plans.

Question 38

Under this category of no-fault laws, rights to litigate are limited but not eliminated; generally, suit can be brought against an automobile driver only when serious injury has resulted from the accident or special damages exceed a given dollar amount, called a threshold.For nonserious injuries and those resulting in losses below the threshold, only no-fault benefits are available.Serious injuries, or those resulting in losses in excess of the dollar-value threshold, permit the injured party to take legal action, including claims for general damages (such as pain and suffering).Identify this category of no-fault law.

A)Add-on no-fault
B)Modified no-fault
C)Threshold no-fault
D)Pure no-fault
E)Tort no-fault

Question 39

Russell meets with an accident while driving under intoxication and injures Nolan.Nolan obtains a judgment against Russell but cannot collect because Russell has neither insurance nor resources.As a result, Nolan is compensated from unsatisfied judgment fund.Identify Russell's punishment.

A)Russell has to spend 5 years in county prison.
B)Russell's driving privileges is suspended until the fund is reimbursed.
C)Russell has to work for the fund until the fund is reimbursed.
D)Russell will not be able to find a white-collar job till the fund is reimbursed.
E)Russell cannot receive auto insurance till the fund is reimbursed.

Question 40

According to these plans, if a company writes 10 percent of the auto insurance business in the state, it has to accept 10 percent of the qualified applicants.Identify these plans.

A)Financial responsibility plans
B)Affirmative plans
C)Unsatisfied judgment plans
D)Add-on plans
E)Auto insurance plans

Question 41

In modified no-fault laws, suit can be brought against an automobile driver for damages exceeding the _____ amount.

Question 42

In an automobile insurance policy, if you choose this limit of liability, a set of two limits will be specifically applied to bodily injury, and a single, aggregate limit will be applied to property damage.For the bodily injury limits, one limit applies per person, per accident, and a second limit is the total the insurer will pay for your liability to all persons injured in an accident.The limit for property damage is shown separately.Identify this limit of liability.

A)Double limit of liability
B)Split limit of liability
C)Tort limit of liability
D)Multiple limit of liability
E)Single limit of liability

Question 43

Identify the coverage that fills in the coverage gap that arises when the negligent party meets the financial responsibility law of the state, but the auto accident victim has losses in excess of the negligent driver's liability limit.

A)Stacking coverage
B)Supplementary motorist coverage
C)Nonfortuitous coverage
D)Underinsured motorist coverage
E)Uninsured motorist coverage

Question 44

Write a note on the duties after an accident or loss in an auto insurance coverage.

Question 45

Write a short note on joint underwriting association.

Question 46

Identify the coverage that pays for bodily injuries caused by an accident with another vehicle whose driver is negligent and has no liability insurance or less than that required by law.

A)Stacking coverage
B)Supplementary motorist coverage
C)Nonfortuitous coverage
D)Underinsured motorist coverage
E)Uninsured motorist coverage

Question 47

Justify the growing interest in no-fault laws.Discuss it advantages and disadvantages of no-fault laws.

Question 48

All events resulting in automobile liability are:

A)excluded unless specifically included.
B)covered unless specifically excluded.
C)on a named-perils basis.
D)settled by the insurer without the approval of the insured.
E)paid by the insurer even after the limit of liability is crossed.

Question 49

Which of the followings limits is best described as 150/300/50?

A)Bodily injury: $150,000 each person, $300,000 each accident; Property damage: $50,000 each accident
B)Bodily injury: $150,000 each person; Property damage: $300,000 each accident, $50,000 each property
C)Property damage: $150,000 each property, $300,000 each accident; Bodily injury: $50,000 each person
D)Bodily injury: $50,000 each person; Property damage: $150,000 each accident; Limit: $300,000 each accident
E)Bodily injury; $300,000 each person; Property damage: $50,000 each property, $150,000 each accident

Question 50

Differentiate between single limit of liability and split limit of liability.

Question 51

Explain no-fault laws and its categories in detail.

Question 52

Which of the following statements is true about exclusions in an automobile insurance policy?

A)Unlike in the homeowner's policy, nonfortuitous harm is always included in auto insurance policies.
B)Property damage to owned or used property is included in the PAP.
C)Bodily injury to an employee of the covered person who is eligible for workers' compensation benefits is excluded.
D)Auto Insurers excludes all business uses of motor vehicles.
E)The auto insurer prefers to provide coverage to the mechanic while he or she is test-driving your car because the automobile business is expected to have its own automobile policy.

Question 53

In an automobile insurance policy, the only limit of liability that you are concerned with in this case is the aggregate limit.Once all losses equal this limit, you will have to bear the burden of any further liability.Identify this limit of liability.

A)Double limit of liability
B)Split limit of liability
C)Tort limit of liability
D)Multiple limit of liability
E)Single limit of liability

Question 54

If a person who receives payment from the insurer has the right to recover damages from another, the insurer has the right to:

A)gentrification.
B)subrogation.
C)redlining.
D)demutualization.
E)blockbusting.

Question 55

Under _____ laws, benefits are provided by insurers without regard to who caused the accident.

Question 56

Which of the following occurs when a single auto policy covers two vehicles, and the court interprets this situation to yield a limit of liability equal to double the amount shown in the policy declarations?

A)Indemnification
B)Redlining
C)Gentrifying
D)Stacking
E)Demutualization

Question 57

Which of the following identifies you by name and address and shows the term of the policy, the premiums charged, the coverages provided, and the limits of liability of the coverages?

A)Declarations
B)Definitions
C)Conditions
D)Defenses
E)Exclusions

Question 58

Assume that you have limits of 15/25/15 ($15,000/$25,000/$15,000), the minimum required in the state where your car is garaged.If you are driving in a state that requires 25/50/20 ($25,000/$50,000/$20,000) and are involved in an accident, your insurer will interpret your policy as if it had the higher limits.Thus, even though you have to meet only the requirements where you live, your policy will provide the limits you need in any state or province in which you may be driving.Identify the provision in your automobile insurance policy that makes this possible.

A)Indemnification
B)Stacking
C)Out-of-state
D)Redlining
E)Gentrification

Question 59

In states that have _____, all automobile insurers in the state are members and the association is, in effect, an insurance industry company.

A)unsatisfied judgment plans
B)reinsurance facility
C)auto insurance plans
D)joint underwriting association
E)modified no-fault laws

Question 60

In states that have _____, every auto insurer is required to issue auto insurance to any licensed driver who applies and can pay the premium; in return, insurers can transfer the burden of bad risks to a pool to which all auto insurers belong.

A)unsatisfied judgment plans
B)reinsurance facility
C)auto insurance plans
D)joint underwriting association
E)modified no-fault laws

Question 61

You can recover expenses under Part C of the PAP only if you are involved in an accident with a(n) _____ driver of an uninsured motor vehicle.

Question 62

If you choose a(n) _____ of liability, a set of two limits will be specifically applied to bodily injury, and a single, aggregate limit will be applied to property damage.

Question 63

The _____ provision takes care of a situation in which your liability limits comply with the financial responsibility or compulsory insurance law in your state but are inadequate in another state.

Question 64

_____ coverage covers street signs, fences, bicycles, telephone poles, houses, and other types of property.

Question 65

The _____ coverage will pay the difference between the at-fault driver's liability and the at-fault driver's limit of liability insurance, up to the amount of underinsured motorists coverage purchased.

Question 66

_____ means the upset (turning over) of the covered auto or nonowned auto, or striking another object.

Question 67

The _____ is the automobile insurance contract purchased by most individuals, whether to meet financial responsibility laws or just to protect against the costs associated with auto accidents.

Question 68

In an automobile insurance policy, if you choose a(n) _____ of liability to cover all liability, including both property damage and bodily injury, then the insurer will pay on your behalf for all losses up to this limit for any single accident, whether they are property-related or bodily injury-related.

Question 69

The maximum amount the injured party may claim from the unsatisfied judgment fund is usually the same as that established by the state's _____ law.

Question 70

In the definitions section of an automobile insurance coverage, "_____" means a vehicle designed to be pulled by a private passenger auto or pickup, panel truck, or van.It also means a farm wagon or farm implement being towed by one of the vehicles listed.

Question 71

Auto insurance plans were formerly called _____ plans because they operate on an assignment basis.

Question 72

The liability coverage of the PAP is excess with regard to a nonowned vehicle.If two excess policies apply, then the "other insurance" provision calls for a(n) _____ distribution of liability.

Question 73

In states that have _____, several insurers are appointed as servicing carriers to act as agents for the association.An applicant for insurance who cannot meet underwriting requirements in the regular market is issued a policy by the servicing carrier on behalf of the association; as far as the policyholder is concerned, the association is his or her insurer.

Question 74

_____ plans are also known as expanded first-party coverage.

Question 75

Liability coverage under the PAP usually is subject to a single, aggregate limit called a(n) _____.