Question 1

The multi-car discount is based on the assumption that

Accepted Answer

A) two cars owned by the same person will not be driven as frequently as one car. 
B) multiple vehicle owners are safer drivers. 
C) owners of more than one vehicle are more likely to be financially responsible. 
D) lower liability limits are needed if there are multiple autos insured. 
A) two cars owned by the same person will not be driven as frequently as one car. 
B) multiple vehicle owners are safer drivers. 
C) owners of more than one vehicle are more likely to be financially responsible. 
D) lower liability limits are needed if there are multiple autos insured. A

Question 2

Criticisms of compulsory insurance laws include which of the following?
I.They provide less than complete protection since they require only a minimum amount of liability insurance.
II.Even with compulsory insurance laws,a substantial number of motorists continue to operate vehicles without insurance.

Accepted Answer

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

Question 3

Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages,such as pain and suffering.These laws are called

Accepted Answer

A) pure no-fault laws. 
B) "no pay,no play" laws. 
C) financial responsibility laws. 
D) unsatisfied judgment laws. 
A) pure no-fault laws. 
B) "no pay,no play" laws. 
C) financial responsibility laws. 
D) unsatisfied judgment laws. B

Question 4

Disadvantages of automobile insurance plans include which of the following?
I.High premiums may cause many high-risk drivers to go uninsured.
II.Large underwriting profits have resulted in high-risk drivers subsidizing the cost of insurance for good drivers in the voluntary markets.

Accepted Answer

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

Question 5

Which of the following statements about joint underwriting associations for insuring high-risk drivers is (are)true?
I.Underwriting losses are proportionately shared by all auto insurers based on premiums written in the state.
II.Each company participating in a joint underwriting association sets it own rates.

Accepted Answer

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

Question 6

Which of the following statements is (are)true with respect to the use of credit-based insurance scores as an auto insurance rating factor?
I.Insurers claim that drivers who have poor insurance scores are expected to have relatively more accidents.
II.The use of insurance scores in personal lines underwriting is controversial.

Accepted Answer

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

Question 7

All of the following are major rating factors for determining private passenger automobile insurance premiums EXCEPT

Accepted Answer

A) gender. 
B) age. 
C) race. 
D) marital status. 
A) gender. 
B) age. 
C) race. 
D) marital status.

Question 8

In Maryland,drivers who are unable to obtain auto insurance in the voluntary market are insured through a(n)

Accepted Answer

A) state fund. 
B) reinsurance facility. 
C) joint underwriting association 
D) automobile insurance plan. 
A) state fund. 
B) reinsurance facility. 
C) joint underwriting association 
D) automobile insurance plan.

Question 9

Bill was severely injured by an uninsured driver.Bill did not purchase uninsured motorists coverage,and the other driver,although held liable,could not pay the damages awarded.After exhausting all sources of recovery,Bill obtained some relief from a state fund designed to compensate individuals like Bill.These state funds are called

Accepted Answer

A) guaranty funds. 
B) unsatisfied judgment funds. 
C) rainy-day funds. 
D) second injury funds. 
A) guaranty funds. 
B) unsatisfied judgment funds. 
C) rainy-day funds. 
D) second injury funds.

Question 10

Sharon lives in a state that has a no-fault automobile insurance law.Under the law,an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold.The no-fault law in Sharon's state is a(n)

Accepted Answer

A) pure no-fault plan. 
B) modified no-fault plan. 
C) add-on plan. 
D) choice no-fault plan. 
A) pure no-fault plan. 
B) modified no-fault plan. 
C) add-on plan. 
D) choice no-fault plan.

Question 11

Defects of financial responsibility laws include which of the following?
I.Accident victims may not be fully compensated for their injuries.
II.They apply only to property damage losses,not to bodily injury claims.

Accepted Answer

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

Question 12

New Jersey's dollar-a-day auto insurance coverage is limited to

Accepted Answer

A) elderly individuals. 
B) Medicaid recipients. 
C) drivers under age 25. 
D) high-risk drivers. 
A) elderly individuals. 
B) Medicaid recipients. 
C) drivers under age 25. 
D) high-risk drivers.

Question 13

Which of the following statements is true with respect to a pure no-fault auto insurance plan?

Accepted Answer

A) Under such a plan,you would collect from your own insurer and retain the right to sue the other party if your injuries surpass a dollar or verbal threshold. 
B) Most no-fault plans that have been adopted by states are pure no-fault plans. 
C) Under such a plan,you would collect from your own insurer and retain the right to sue the other party without having to satisfy a threshold. 
D) Under such a plan,an accident victim cannot sue the other party,and no payments are made for pain and suffering. 
A) Under such a plan,you would collect from your own insurer and retain the right to sue the other party if your injuries surpass a dollar or verbal threshold. 
B) Most no-fault plans that have been adopted by states are pure no-fault plans. 
C) Under such a plan,you would collect from your own insurer and retain the right to sue the other party without having to satisfy a threshold. 
D) Under such a plan,an accident victim cannot sue the other party,and no payments are made for pain and suffering.

Question 14

Under financial responsibility laws,proof of financial responsibility is generally required under which of the following circumstances?

Accepted Answer

A) The use of an auto by any driver with fewer than 3 years of driving experience 
B) When an individual renews his or her driver's license 
C) Failure to pay a final judgment resulting from an auto accident 
D) The accumulation of unpaid parking tickets exceeding a specified value 
A) The use of an auto by any driver with fewer than 3 years of driving experience 
B) When an individual renews his or her driver's license 
C) Failure to pay a final judgment resulting from an auto accident 
D) The accumulation of unpaid parking tickets exceeding a specified value

Question 15

In the state where Susan lives,drivers whom private insurance companies do not want to insure are placed in a common pool,and each insurer pays its pro rata share of pool losses and expenses.A common policy is used for all high-risk drivers.Susan's state handles high-risk drivers through a(n)

Accepted Answer

A) automobile insurance plan. 
B) joint underwriting association. 
C) pure no-fault plan. 
D) specialty auto insurer. 
A) automobile insurance plan. 
B) joint underwriting association. 
C) pure no-fault plan. 
D) specialty auto insurer.

Question 16

Which of the following statements about shopping for auto insurance is true?

Accepted Answer

A) Adequate physical damage insurance on your auto is the most important consideration. 
B) Consideration should be given to dropping liability coverage if you drive an older car with a low market value. 
C) To obtain the lowest premium,an applicant should review his or her eligibility for all discounts offered. 
D) Price comparisons are of little value since auto insurers tend to charge the same premiums. 
A) Adequate physical damage insurance on your auto is the most important consideration. 
B) Consideration should be given to dropping liability coverage if you drive an older car with a low market value. 
C) To obtain the lowest premium,an applicant should review his or her eligibility for all discounts offered. 
D) Price comparisons are of little value since auto insurers tend to charge the same premiums.

Question 17

Amber believes that her auto insurance premium is too high.Which of the following would most likely lower Amber's premium?

Accepted Answer

A) Amber could increase her physical damage deductible. 
B) Amber could move from the rural area where she lives to an urban or suburban area. 
C) Amber could increase the amount of liability insurance that she carries. 
D) Amber could add "other-than-collision loss" coverage to her policy. 
A) Amber could increase her physical damage deductible. 
B) Amber could move from the rural area where she lives to an urban or suburban area. 
C) Amber could increase the amount of liability insurance that she carries. 
D) Amber could add "other-than-collision loss" coverage to her policy.

Question 18

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

Accepted Answer

A) Most laws in force today are pure no-fault laws. 
B) Most laws apply to both bodily injury and property damage. 
C) Most laws permit payment of survivor benefits to a surviving spouse and children. 
D) States with add-on plans restrict the right of accident victims to sue negligent drivers. 
A) Most laws in force today are pure no-fault laws. 
B) Most laws apply to both bodily injury and property damage. 
C) Most laws permit payment of survivor benefits to a surviving spouse and children. 
D) States with add-on plans restrict the right of accident victims to sue negligent drivers.

Question 19

A state law that requires individuals who have been involved in an auto accident or who have been convicted for certain vehicle-related offenses to demonstrate the ability to pay liability claims up to a specified dollar amount is called a(n)

Accepted Answer

A) financial responsibility law. 
B) compulsory insurance law. 
C) unsatisfied judgment fund law. 
D) "no pay,no play" law. 
A) financial responsibility law. 
B) compulsory insurance law. 
C) unsatisfied judgment fund law. 
D) "no pay,no play" law.

Question 20

The residual market for auto insurance is designed to provide insurance to

Accepted Answer

A) superior risks who qualify for substantial discounts. 
B) owners of vintage/antique autos where the replacement cost far exceeds the actual cash value. 
C) drivers who are unable to obtain coverage in the standard market. 
D) businesses that need to insure a fleet of vehicles under a single policy. 
A) superior risks who qualify for substantial discounts. 
B) owners of vintage/antique autos where the replacement cost far exceeds the actual cash value. 
C) drivers who are unable to obtain coverage in the standard market. 
D) businesses that need to insure a fleet of vehicles under a single policy.

Exam 23: Auto Insurance and Society

The multi-car discount is based on the assumption that

Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages,such as pain and suffering.These laws are called

Disadvantages of automobile insurance plans include which of the following? I.High premiums may cause many high-risk drivers to go uninsured. II.Large underwriting profits have resulted in high-risk drivers subsidizing the cost of insurance for good drivers in the voluntary markets.

All of the following are major rating factors for determining private passenger automobile insurance premiums EXCEPT

In Maryland,drivers who are unable to obtain auto insurance in the voluntary market are insured through a(n)

Sharon lives in a state that has a no-fault automobile insurance law.Under the law,an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold.The no-fault law in Sharon's state is a(n)

Defects of financial responsibility laws include which of the following? I.Accident victims may not be fully compensated for their injuries. II.They apply only to property damage losses,not to bodily injury claims.

New Jersey's dollar-a-day auto insurance coverage is limited to

Which of the following statements is true with respect to a pure no-fault auto insurance plan?

Under financial responsibility laws,proof of financial responsibility is generally required under which of the following circumstances?

In the state where Susan lives,drivers whom private insurance companies do not want to insure are placed in a common pool,and each insurer pays its pro rata share of pool losses and expenses.A common policy is used for all high-risk drivers.Susan's state handles high-risk drivers through a(n)

Which of the following statements about shopping for auto insurance is true?

Amber believes that her auto insurance premium is too high.Which of the following would most likely lower Amber's premium?

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

A state law that requires individuals who have been involved in an auto accident or who have been convicted for certain vehicle-related offenses to demonstrate the ability to pay liability claims up to a specified dollar amount is called a(n)

The residual market for auto insurance is designed to provide insurance to

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Advanced Topics in Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance

Life Insurance Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Homeowners Insurance,section I

Homeowners Insurance,section II

Auto Insurance

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters