Question 1

The purpose of financial responsibility laws is to:

Accepted Answer

The purpose of financial responsibility laws is to protect the public from financial losses due to auto accidents. These laws require drivers to have a minimum amount of liability insurance coverage that compensates for damages caused by their negligence while driving. This ensures that injured parties are able to receive compensation for their losses without having to bear the financial burden themselves.

Question 2

Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by:

Accepted Answer

Since the other driver does not have insurance, Henry would be covered under his own uninsured motorists protection, which is designed to pay for damages caused by drivers who do not have insurance.

Question 3

Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?

Accepted Answer

Since the policy provides for replacement value, the insurance company will pay the cost of a comparable microwave today, which is $400.

Question 4

Which one of the following coverages would pay for medical care for people who were injured in your automobile?

Accepted Answer

Medical payments coverage is specifically designed to cover medical expenses for you, your passengers, or anyone else who may be injured while in your vehicle, regardless of who is at fault in the accident.

Question 5

Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay?

Accepted Answer

$600 F1F1F1S1F1F1F10 $250 = $350.

Question 6

The ____________ method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.

Accepted Answer

The method described is the actual cash value method.

Question 7

____________ provides coverage for the risk of financial loss due to legal expenses, medical expenses, lost wages, and other expenses associated with injuries caused by an automobile accident for which you were responsible.

Accepted Answer

Bodily injury liability insurance provides coverage for the financial loss and expenses related to injuries caused by an automobile accident for which the policyholder is responsible. This type of insurance includes legal expenses, medical expenses, lost wages, and other associated expenses. It is a mandatory requirement in most states in the US.

Question 8

Which form of homeowner's policy provides coverage for the most risks?

Accepted Answer

Special homeowner's policy provides coverage for the most risks compared to Basic and Broad policies. It covers structural damage to the dwelling from any risk that is not specifically excluded in the policy. It also covers personal property on an "open perils" basis, meaning almost all risks are covered unless specifically excluded. Additionally, it provides coverage for liability and additional living expenses.

Question 9

The 100 in 100/300/50 refers to:

Accepted Answer

The 100 in 100/300/50 refers to the limit for bodily injury claims that can be paid to one person. Specifically, it means that the insurance policy will pay up to $100,000 for bodily injury claims for one person involved in an accident. The 300 refers to the total coverage for an accident and the 50 refers to property damage liability coverage.

Question 10

Which one of the following insurance policy provisions requires the insured to pay for part of the loss if the property is not insured for the specified percentage of replacement value?

Accepted Answer

The coinsurance clause requires the insured to maintain insurance on the property to a specified percentage of its replacement value. If the insured fails to maintain the required percentage of insurance, the coinsurance clause will apply a penalty to the amount of the loss. The penalty requires the insured to pay for part of the loss based on the percentage of insurance that was maintained compared to the percentage that should have been maintained.

Question 11

Kelly and Bob Walton recently purchased a new home and desire coverage for all causes of loss or damage except those specially excluded by the policy. They should obtain the ____________ form of homeowner's policy.

Accepted Answer

The special form of homeowner's policy is the only form that provides coverage for all causes of loss or damage except those specially excluded by the policy. This is also known as an all-risk or open-peril policy.

Question 12

The 25 in 50/100/25 refers to ____________ coverage.

Accepted Answer

The first number in the 50/100/25 refers to the amount of coverage for property damage liability. Therefore, the answer is E - property damage liability.

Question 13

Renter's insurance would include coverage for:

Accepted Answer

Renter's insurance typically covers personal property such as electronics, furniture, clothing, and other belongings in the event of damage or theft.

Option A is not typically included in standard renter's insurance policies and would need to be purchased separately as a flood insurance policy.

Option C is the responsibility of the landlord or owner and would be covered under their insurance policy, not the renter's insurance.

Option D, umbrella liability, is an additional coverage that can be added to a renter's insurance policy but is not automatically included.

Option E would also need to be added to a renter's insurance policy as a separate earthquake insurance policy.

Question 14

Which one of the following types of coverage would pay for damage to your automobile in an accident for which you were at fault?

Accepted Answer

Collision coverage pays for damage to your own vehicle in an accident regardless of who is at fault. Property damage liability only covers damage you cause to other people's property, comprehensive physical damage covers damages from non-collision events such as theft or weather, and no-fault insurance pays for injuries regardless of fault. Assigned risk pool coverage is a type of insurance for high-risk drivers and does not specifically cover damage in an at-fault accident.

Question 15

Comprehensive coverage would cover financial losses due to:

Accepted Answer

The answer of Comprehensive coverage would cover financial losses due...

Question 16

____________ protects you against financial loss when your car damages the property of others.

Accepted Answer

Property damage liability coverage specifically protects the policyholder against financial loss when their car damages the property of others.

Question 17

Home insurance costs are affected most directly by:

Accepted Answer

Home insurance costs are most directly affected by the number of claims in an area. Insurance companies use data analysis to determine risk levels of certain areas, and if there are a high number of claims in a particular location, insurance premiums for homes in that area are likely to increase.

Question 18

Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?

Accepted Answer

No-fault insurance is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company, regardless of who was at fault for the accident.

Question 19

____________ coverage would pay for damage to your vehicle caused by an accident when another driver with insurance was legally at fault.

Accepted Answer

Collision coverage is designed to pay for damage to your vehicle caused by a collision with another vehicle or object, regardless of who was at fault. In this scenario, the other driver has insurance and is legally at fault, so their insurance would typically cover the damage to your vehicle. However, if their insurance does not fully cover the damage or if they do not have insurance, collision coverage would provide additional protection. Property damage liability coverage (A) pays for damage you cause to another person's property, not your own. Comprehensive physical damage coverage (C) is designed to pay for damage to your vehicle from non-collision events like theft, vandalism, and weather damage. Uninsured motorists protection (D) is designed to pay for your own injuries and damages if you are in an accident with a driver who does not have insurance. Assigned risk (E) refers to a system where high-risk drivers are assigned to insurance companies, it is not a type of coverage.

Question 20

Which one of the following is not covered by renter's insurance?

Accepted Answer

Renter's insurance typically covers personal property, liability, medical expenses for visitors, additional living expenses, and accidental damage to others' property. However, damages to the building's roof would typically be covered by the landlord's insurance policy.

Quiz 10: Property and Motor Vehicle Insurance