Alaska Personal Lines Insurance License Exam — All Questions

In the Personal Auto Policy, coverage for bodily injury and property damage the insured causes to others is provided under:

• a.Part D – Coverage for Damage to Your Auto
• b.Part C – Uninsured Motorists
• c.Part B – Medical Payments
• d.Part A – Liability Coverage✓

Part A (Liability Coverage) responds when the insured is legally responsible for bodily injury or property damage to others from the use of a covered auto, paying damages and providing a legal defense. Part B pays medical expenses for the insured and passengers, Part C covers injuries caused by uninsured or underinsured drivers, and Part D covers physical damage to the insured's own vehicle.

Under Part D of the Personal Auto Policy, damage to the insured's own vehicle from striking a tree is covered by:

• a.Uninsured motorists coverage
• b.Medical payments coverage
• c.Liability coverage
• d.Collision coverage✓

Collision coverage pays for damage to the insured's own auto from colliding with another vehicle or object, such as a tree, or from upset (overturning), regardless of fault. Liability coverage pays for damage the insured causes to others, medical payments covers injuries to the insured and passengers, and uninsured motorists covers injuries caused by an uninsured at-fault driver, none of which apply to the insured's own vehicle damage.

Which loss to the insured's own vehicle would be covered under other-than-collision (comprehensive) coverage?

• a.Sideswiping a guardrail on a narrow bridge
• b.Rear-ending another vehicle at a stop light
• c.Having the parked vehicle stolen overnight✓
• d.Rolling the car over in a roadside ditch

Other-than-collision (comprehensive) coverage pays for losses not caused by collision or upset, including theft, fire, vandalism, hail, flood, glass breakage, and animal strikes. Rear-ending a vehicle, rolling over, and sideswiping a guardrail are all collision or upset losses covered under collision coverage. Theft of the vehicle is a classic comprehensive loss.

Auto liability limits shown as 50/100/25 mean the policy pays up to:

• a.$50,000 for each accident no matter how many are hurt
• b.$50,000 per person, $100,000 per accident, $25,000 property✓
• c.$100,000 per person for injury and $50,000 per accident
• d.$25,000 per person for injury and $50,000 property damage

Split limits are read as bodily injury per person / bodily injury per accident / property damage per accident. So 50/100/25 means up to $50,000 for one injured person, up to $100,000 total for all bodily injury in one accident, and up to $25,000 for property damage per accident. State law sets the minimum required limits, but the way split limits are read is national.

Uninsured motorists coverage protects the insured when:

• a.They injure a pedestrian while backing out of a driveway
• b.An at-fault driver with no liability insurance injures them✓
• c.Their parked vehicle is stolen from a shopping center lot
• d.They damage their own vehicle by striking a wall or pole

Uninsured motorists coverage protects an insured who is injured by an at-fault driver carrying no liability insurance, or who cannot be identified such as in a hit-and-run. It supplies the liability protection the negligent driver failed to carry. Damage to the insured's own vehicle is covered under Part D, and injuring others is a Part A liability matter, not uninsured motorists coverage.

Under a Personal Auto Policy, coverage generally extends to a newly acquired vehicle and to a temporary substitute auto when the insured's car is being repaired. This reflects that the policy:

• a.Covers only those vehicles listed on the declarations page
• b.Covers any vehicle the insured drives, without conditions
• c.Excludes every borrowed or substitute vehicle from coverage
• d.Extends automatic coverage to newly acquired and substitute autos✓

The Personal Auto Policy defines covered autos to include the vehicles listed on the declarations plus, within policy rules, newly acquired autos (for a limited time, sometimes requiring notice) and a temporary substitute auto used while a covered vehicle is out of service. This prevents a coverage gap when the insured changes cars or uses a loaner during repairs, though specific conditions and time limits apply.

The personal auto policy is organized into six parts. Which statement correctly matches a part with what it does?

• a.Part B pays medical expenses for the insured and passengers✓
• b.Part D pays the medical bills of an injured pedestrian
• c.Part A pays for damage to the insured's own covered auto
• d.Part C pays the third parties that the insured injures

The six parts run A liability, B medical payments, C uninsured motorists, D damage to your auto, E duties after an accident, and F general provisions. Part B pays reasonable medical expenses for the insured, family members and passengers hurt in a covered accident, without regard to fault. The choice that puts third-party injury claims in Part C confuses uninsured motorists coverage, which pays the insured, with Part A liability.

In the personal auto policy, the words "you" and "your" refer to:

• a.The named insured and any passenger riding in the covered auto
• b.Anyone who drives the covered auto with the owner's permission
• c.The named insured shown in the declarations and a resident spouse✓
• d.Every person related to the named insured by blood or marriage

The policy defines "you" and "your" as the named insured shown on the declarations page and that person's spouse if the spouse is a resident of the same household. Relatives living in the household are also insureds, but the policy calls them family members rather than "you". A permissive driver of the covered auto is an insured for liability purposes without ever becoming the named insured.

Under the personal auto policy, a "family member" is a person who is:

• a.Living in the household but unrelated, such as a roommate or tenant
• b.Named on the declarations page as an additional listed operator
• c.Related to the insured in any way, whether or not living in the household
• d.Related to the insured by blood, marriage or adoption and a household resident✓

A family member is a person related to the named insured by blood, marriage or adoption who is a resident of the household, and the definition reaches a ward or foster child. Both parts of the test must be met, so an out-of-town relative fails the residency half and a roommate fails the relationship half. Family members are insureds without being listed as drivers on the declarations.

The insured owns a utility trailer that is towed by the van listed on the policy. Under Part A of the personal auto policy, the trailer is:

• a.Excluded, since a trailer does not have four wheels of its own
• b.Treated as a covered auto, since a trailer the insured owns qualifies✓
• c.Covered only while it is detached and parked at the residence
• d.Outside the policy unless the trailer is listed on the declarations

The definition of "your covered auto" includes any trailer the named insured owns, so a utility trailer is a covered auto for liability whether it is hitched or standing. A trailer here means a vehicle designed to be pulled by a private passenger auto, pickup or van. The fewer-than-four-wheels exclusion is aimed at motorized vehicles such as motorcycles, not at owned trailers.

The insured's only listed car is in the shop for transmission repairs, so the insured borrows a neighbor's sedan for the week. Under the policy that sedan is:

• a.A non-owned auto that the policy treats as entirely uninsured
• b.A temporary substitute auto, treated as the insured's covered auto✓
• c.Outside coverage until the insurer endorses it onto the policy
• d.Covered only if the neighbor's own policy has already been used up

A temporary substitute is a vehicle the insured does not own, used with permission, while a covered auto is out of normal use because of breakdown, repair, servicing, loss or destruction. A car borrowed while the listed vehicle sits in the shop fits that definition and is a covered auto for the week. No endorsement or notice to the insurer is needed to make the substitution work.

A friend borrows the insured's covered auto with permission and negligently causes $60,000 of bodily injury. Under Part A, the friend is:

• a.An insured only if living in the insured's household
• b.Covered after the friend's own policy is exhausted
• c.An insured, so the policy pays the damages up to its limit✓
• d.Not an insured, since only the named insured has protection

Part A makes any person using the covered auto with permission an insured for that use, so the borrowing friend has the policy's liability protection behind him. Coverage on an owned auto responds for the driver; residency in the household is the test for a family member, not for a permissive user. The friend's own policy is not required to pay the $60,000 first.

A resident son borrows a classmate's car with permission and injures a cyclist. Under his parent's personal auto policy, Part A liability coverage:

• a.Applies only if the son is listed as a driver on the declarations
• b.Does not apply, because the son is not the named insured
• c.Applies, because a family member is insured while using any auto✓
• d.Does not apply, since the classmate's car is not on the policy

The named insured and family members are insureds for the ownership, maintenance or use of any auto or trailer, not only the vehicles shown on the declarations, so liability follows the resident son into a borrowed car. Family members are insureds by definition and do not have to be listed as drivers. The exclusions still apply, notably one for a vehicle furnished for the son's regular use.

The duty to defend under Part A of the personal auto policy means the insurer:

• a.Must defend the insured against any suit, covered by the policy or not
• b.Defends only when the claimant demands more than the policy limit
• c.Must defend a suit seeking damages the policy covers, and may settle✓
• d.Reimburses defense costs only after a judgment has been entered

The insurer has both the right and the duty to defend any suit asking for damages that Part A would pay, and it may investigate and settle any claim as it thinks appropriate. The duty is tied to the allegations, so it does not extend to a suit seeking damages the policy does not cover. It ends once the limit of liability has been exhausted by payment of judgments or settlements.

An insured with a $100,000 per-person bodily injury limit is sued, a $100,000 judgment is entered, and the insurer spent $30,000 defending the case. In total the insurer pays:

• a.$130,000, because defense costs are paid on top of the limit✓
• b.$100,000, with the insured billed for the defense cost
• c.$70,000, because defense spending reduces what is paid
• d.$100,000, since the defense cost is taken from the limit itself

Defense is a separate promise, not a payment of damages, so the cost of defending sits outside the limit of liability: $100,000 of damages plus $30,000 of defense equals $130,000 out of the insurer's pocket. The answer that nets defense out of the limit would leave the claimant $30,000 short of the judgment. Nothing is billed back to the insured, and Part A carries no deductible.

A driver with 100/300/50 limits is at fault. One person's injuries are valued at $150,000, a second person's at $80,000, and a car is damaged to the extent of $12,000. Part A pays:

• a.$112,000, one person and the car
• b.$192,000, the injuries and car✓
• c.$180,000, the injuries only
• d.$242,000, the claims and the car

The per-person cap trims the $150,000 claim to $100,000, while the second person is paid $80,000 in full; $100,000 + $80,000 = $180,000, which fits inside the $300,000 per-accident limit. Property damage draws on its own $50,000 limit, so the $12,000 car is paid entirely, and $180,000 + $12,000 = $192,000. The $242,000 figure comes from ignoring the per-person cap altogether.

With 100/300/50 limits, an at-fault insured injures four people whose claims are valued at $90,000, $120,000, $150,000 and $60,000. Part A bodily injury pays:

• a.$350,000, after the per-person caps
• b.$300,000, the per-accident limit✓
• c.$420,000, the four claims in full
• d.$400,000, four times the per-person cap

Apply the per-person cap first: $90,000 + $100,000 + $100,000 + $60,000 = $350,000. That total then runs into the $300,000 per-accident limit, so $300,000 is the most payable for all bodily injury in the accident and the claimants share it. The $350,000 answer stops after the per-person step, and $420,000 is the untrimmed sum of the four claims.

An insured with 100/300/50 limits runs off the road and destroys a $65,000 car and a $10,000 fence. Part A property damage pays:

• a.$100,000
• b.$75,000
• c.$25,000
• d.$50,000✓

The third number in a split limit is property damage per accident, so $50,000 is the most payable for all property destroyed in one accident even though the car and fence total $75,000. The insured personally owes the $25,000 shortfall. The $100,000 answer borrows the bodily injury per-person figure, which has nothing to do with damaged property.

A combined single limit differs from split limits because a combined single limit:

• a.Applies one amount to the whole policy term rather than per accident
• b.Applies one amount for bodily injury and a separate one for property
• c.Applies one amount to all bodily injury and property damage per accident✓
• d.Applies one amount to each injured person, with no accident cap

A combined single limit is one pot of money for everything arising out of one accident, so bodily injury and property damage compete for the same dollars and no per-person cap gets in the way. Split limits instead set a per-person injury cap, a per-accident injury cap, and a separate property damage cap. The answer that describes separate injury and property amounts is a split limit, not a combined one.

An insured carries a $300,000 combined single limit. In one at-fault accident, two people are injured with claims valued at $200,000 and $50,000, and $80,000 of property is destroyed. Part A pays:

• a.$330,000, the full value of the claims
• b.$250,000, the two injury claims
• c.$300,000, the single limit✓
• d.$200,000, a per-person share of it

One limit answers for the whole accident, so add everything up: $200,000 + $50,000 + $80,000 = $330,000 of damages against a single $300,000 limit. The insurer pays $300,000 and the insured is exposed for the $30,000 difference. The answer that counts only the two injury claims forgets that property damage draws on the same limit, and a combined single limit has no per-person cap to apply.

Supplementary payments under Part A of the personal auto policy are:

• a.Paid only when the insured buys an extra defense endorsement
• b.Subtracted from the limit of liability before damages are paid
• c.Available only when the insured wins the lawsuit outright
• d.Paid in addition to the limit of liability, not out of it✓

Supplementary payments are made over and above the limit of liability, so the claimant still receives the full limit. They include bail bonds up to $250, the premium on an appeal bond, interest accruing after a judgment, up to $200 a day for loss of earnings when the insurer asks the insured to attend, and other expenses incurred at the insurer's request. The answer that subtracts them from the limit describes how defense costs work under some other lines, not here.

After a covered accident the insured is arrested and bail is set at $500. Under the supplementary payments, the insurer pays:

• a.Nothing, because bail is not an insured expense
• b.$200, which is the daily loss-of-earnings figure
• c.$500, because bail follows any covered accident
• d.$250, the most payable toward a bail bond✓

Supplementary payments include the cost of bail bonds required because of an accident covered by the policy, capped at $250, so the insurer funds $250 and the insured covers the remaining $250 of the $500 bail. The cap is a maximum, not a per-day figure. The $200 answer confuses the bail cap with the separate daily allowance for lost earnings.

The insurer asks the insured to attend a four-day trial, and the insured loses $260 of earnings on each of those days. The supplementary payments pay:

• a.$800, four days at the $200 daily cap✓
• b.Nothing, lost earnings are not payable
• c.$250, the supplementary payments cap
• d.$1,040, the insured's full lost earnings

The policy pays up to $200 a day for loss of earnings when the insurer asks the insured to attend a hearing or trial, so four days produce 4 x $200 = $800 and the extra $60 a day is the insured's own loss. Choosing the full $1,040 ignores the daily cap. The $250 figure is the bail bond maximum, a different supplementary payment entirely.

An insured deliberately drives into another car after an argument, injuring the other driver. Part A liability coverage:

• a.Applies in full, because the insured was operating a covered auto
• b.Applies, but only up to the property damage limit
• c.Applies once a court has convicted the insured of the offense
• d.Does not apply, since injury caused on purpose is excluded✓

Part A excludes bodily injury or property damage caused intentionally by or at the direction of an insured, because insurance responds to fortuitous accidents rather than deliberate harm. Operating a covered auto does not rescue the claim; the exclusion turns on intent, not on the vehicle. The answer that waits for a criminal conviction also misreads it, since the exclusion applies whether or not a court ever acts.

An insured borrows a friend's boat trailer, and while it is hitched to the insured's car the trailer is crushed. Under Part A the $9,000 of damage is:

• a.Covered up to the property damage limit less the deductible
• b.Excluded only if the insured signed a rental contract
• c.Covered, because the trailer belongs to somebody else
• d.Excluded, as property in the insured's care is not covered✓

Part A excludes damage to property owned by, transported by, rented to, used by, or in the care of an insured, and a borrowed trailer hitched to the insured's car is squarely in the insured's care. Liability coverage is for damage to other people's property the insured is not looking after; bailee-type exposures need different coverage. The answer applying a deductible also misstates Part A, which has none.

An insured's employee is injured while occupying the insured's covered auto during work, and workers compensation benefits are payable. Part A liability:

• a.Excludes it only if the employee was driving the auto
• b.Excludes the claim, because workers compensation applies✓
• c.Pays the whole injury claim on top of the comp benefits paid
• d.Pays whatever amount the workers compensation award misses

Part A excludes bodily injury to an employee of an insured during the course of employment when workers compensation benefits are required or available, because that exposure belongs to workers compensation and employers liability coverage. A domestic employee not entitled to those benefits is the recognized exception. The answer that pays the excess over comp describes how some other coverages coordinate, not this exclusion.

An insured signs up to deliver restaurant orders for pay and causes $18,000 of damage while on a delivery run. Part A liability coverage:

• a.Applies, because the insured owns the auto being driven
• b.Is excluded, since the auto was carrying property for a fee✓
• c.Is excluded only when the insured drives more than part time
• d.Applies, because delivery driving is a personal errand

Part A excludes liability while a vehicle is being used to carry persons or property for a fee, and a paid delivery run is exactly that, so the $18,000 falls back on the insured. A share-the-expense car pool is the recognized exception, because riders splitting costs are not paying a fee. Owning the vehicle does not defeat the exclusion, which looks at how the auto was being used.

A mechanic test-drives a customer's car after a repair and rear-ends another vehicle. The mechanic's own personal auto policy:

• a.Covers it up to the property damage limit per accident
• b.Covers it, since the mechanic had permission to drive
• c.Excludes it only if the mechanic owns the repair shop
• d.Excludes the loss under the auto business exclusion✓

Part A excludes liability arising out of employment or other use in the auto business, which the policy describes as selling, repairing, servicing, storing or parking vehicles. A test drive after a repair is business use, and a garage policy rather than a personal auto policy is written for it. Having the customer's permission does not matter, and neither does whether the mechanic owns the shop.

The insured buys a motorcycle and rides it without adding it to the personal auto policy. If the insured injures someone while riding, Part A:

• a.Responds up to the bodily injury per-person limit that is shown
• b.Responds in full, because the rider is still the named insured
• c.Does not respond, as vehicles under four wheels are excluded✓
• d.Does not respond until the rider reports the motorcycle

Part A excludes liability arising out of the ownership, maintenance or use of a vehicle having fewer than four wheels, so a motorcycle or moped needs its own policy or an endorsement drafted for it. Being the named insured does not help, because the exclusion is written around the vehicle rather than the driver. Reporting the bike to the insurer would not cure it either, since the policy simply is not built for two wheels.

An employer supplies a car for the insured's regular use and it is not listed on the insured's personal auto policy. When the insured causes a $40,000 loss in it, Part A:

• a.Applies, because the insured does not own that vehicle
• b.Applies as excess over the employer's own auto coverage
• c.Does not apply to a vehicle furnished for regular use✓
• d.Does not apply only when the insured drives it to work

Part A excludes any vehicle other than a covered auto that is owned by the insured or furnished or available for the insured's regular use, and a company car handed over for everyday driving is the classic example. A genuinely occasional borrowed car is different and is not caught. An extended non-owned coverage endorsement is the usual way to close this gap.

A teenager takes a neighbor's car without asking and causes an accident. Under the neighbor's personal auto policy, Part A liability:

• a.Excludes the driver, who lacked any reasonable belief✓
• b.Covers the driver up to the per-person bodily injury limit shown
• c.Excludes the driver only if a police report is filed
• d.Covers the driver, since the auto itself is a covered vehicle

Part A excludes any person using a vehicle without a reasonable belief of being entitled to do so, so a driver who takes a car without asking is not an insured under the owner's policy. Coverage on the auto does not convert an unauthorized taker into an insured. Whether anyone calls the police is beside the point; the test is what the driver could reasonably have believed.

An insured drives into another state whose law requires higher liability limits than the policy carries. The out-of-state coverage provision:

• a.Keeps the lower limit, since the declarations control the limit
• b.Suspends liability coverage until the insured returns home
• c.Requires the insured to buy a separate policy for that trip
• d.Raises the policy to the higher limit that the other law requires✓

The out-of-state provision interprets the policy to provide at least the minimum amounts and types of coverage the other jurisdiction demands of a nonresident, so the insured is not left short while travelling. It is an automatic adjustment written into Part A, which is why no separate trip policy is needed. It does not pay twice for the same damages, and coverage is not suspended at the border.

A policy carries $5,000 of medical payments per person. In one accident the insured driver incurs $6,500 of bills and two passengers incur $3,000 and $1,200. Part B pays:

• a.$9,200✓
• b.$15,000
• c.$10,700
• d.$5,000

Medical payments is a per-person limit, so each injured person is looked at separately: the driver collects $5,000 of the $6,500, and the passengers are paid $3,000 and $1,200 in full, giving $5,000 + $3,000 + $1,200 = $9,200. The $5,000 answer treats the limit as one pot for the whole accident, which is not how a per-person limit works. Who caused the accident does not change the calculation.

Part B medical payments coverage of the personal auto policy pays for:

• a.Any medical bill an insured incurs at any point after the crash
• b.Medical bills of the other driver when the insured is at fault
• c.Necessary medical expenses incurred within a stated time✓
• d.Medical bills only when another driver is found to be at fault

Part B pays reasonable expenses for necessary medical and funeral services caused by an accident, and only for services incurred within the period the policy states after the date of the accident. It covers the named insured and family members while occupying an auto or when struck as pedestrians, plus other people occupying the covered auto. Fault plays no part, which rules out the answer that waits for another driver to be blamed; injuries to that other driver are a Part A liability matter.

How does Part B medical payments coverage differ from Part A liability coverage?

• a.Part B pays only after the insured is held legally liable
• b.Part B pays for the damage to the insured's own vehicle
• c.Part B pays a claimant's lost wages and pain and suffering
• d.Part B pays insured persons regardless of fault✓

Part B is a small first-party coverage that pays medical and funeral expenses for the insured, family members and passengers whether or not anyone was negligent, while Part A pays third parties only when the insured is legally responsible. Lost wages and pain and suffering are liability damages, so they belong to Part A. Part B is also narrower than health insurance, being limited to accident-related expenses within a per-person limit.

Uninsured motorists coverage pays the insured only when the other driver is:

• a.Legally liable for the injuries, and carries no liability insurance✓
• b.Uninsured, whether or not the accident was that driver's fault
• c.Insured for less than the damages the insured actually suffered
• d.Uninsured and also charged by the police for the collision

Part C pays the compensatory damages an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle, so negligence still has to be established even though the insured collects from his own insurer. Dropping the fault requirement would describe a no-fault coverage, which Part C is not. A driver whose limits are simply too low is the underinsured situation, offered as a separate option in most states.

A hit-and-run driver who is never identified injures an insured, whose damages come to $70,000. The insured carries 50/100 uninsured motorists limits. Part C pays:

• a.$50,000✓
• b.$100,000
• c.$0
• d.$70,000

A hit-and-run vehicle whose owner and operator cannot be identified is treated as an uninsured motor vehicle, so Part C responds rather than denying the claim. The first number is the per-person limit, so $50,000 is the most payable for one injured person and the insured absorbs the other $20,000. The $100,000 figure is the per-accident total, which matters only when more than one person is hurt.

The difference between uninsured and underinsured motorists coverage is that underinsured coverage responds when the other driver:

• a.Carries liability limits too low to pay the damages✓
• b.Cannot be identified after leaving the scene of the accident
• c.Refuses to report the accident to his own liability insurer
• d.Carries no liability insurance of any kind at the time of loss

Underinsured motorists coverage, offered as an option in most states, applies when the at-fault driver does carry liability insurance but not enough of it to pay the insured's damages. Uninsured motorists coverage answers the driver who carries none at all, and it also treats an unidentified hit-and-run vehicle as uninsured. How the underinsured payment coordinates with what the other driver's insurer pays is set by each state's law.

Under Part D of a personal auto policy, a collision loss is damage to the covered auto caused by:

• a.Impact with another vehicle or object, or upset of the auto✓
• b.Fire, theft or glass breakage while the auto is parked
• c.Any loss that occurs while the auto is being driven
• d.Contact with a bird or animal while the auto is moving

Collision means the covered auto striking another vehicle or object, or overturning. Fire, theft and glass breakage are other-than-collision causes of loss, and contact with a bird or animal is listed there as well, so the choice naming animal contact points at the wrong coverage. Which cause of loss applies decides which deductible is subtracted.

A car strikes a deer at dusk and sustains $1,900 in damage. The policy carries a $250 other-than-collision deductible and a $500 collision deductible. The insurer pays:

• a.$1,150, because both deductibles apply to an animal strike
• b.$1,650, since animal contact is an other-than-collision loss✓
• c.$1,900, because animal strikes carry no deductible at all
• d.$1,400, since striking a deer is treated as a collision

Contact with a bird or animal is a named other-than-collision cause of loss, so the $250 deductible applies: $1,900 - $250 = $1,650. Treating the deer strike as a collision would wrongly subtract $500 and pay $1,400. One loss is subject to one deductible, and physical damage claims are not paid without one.

The insured loses control on wet pavement and hits a guardrail, causing $3,400 in damage. The policy shows a $500 collision and a $250 other-than-collision deductible. The insurer pays:

• a.$2,900, because impact with an object is a collision✓
• b.$3,150, treating the guardrail as a falling object
• c.$2,650, because both deductibles apply to one impact
• d.$3,400, because road-condition losses are not reduced

Striking a fixed object such as a guardrail is impact, so collision responds and the $500 deductible applies: $3,400 - $500 = $2,900. Calling the guardrail a falling object would apply the $250 comprehensive deductible for $3,150, but the auto struck the rail rather than being struck by it. Deductibles are not stacked on a single loss.

A rock thrown up by a passing truck cracks the insured's windshield. Under Part D this loss is:

• a.Covered by liability, as the truck driver is at fault
• b.Excluded, because road debris damage is wear and tear
• c.Collision, because an object struck the auto
• d.Other than collision, as glass broken by a missile✓

Breakage of glass and damage from a missile or falling object are named other-than-collision causes of loss, so the comprehensive deductible applies. Classing it as collision would apply the collision deductible, typically the larger of the two. Liability pays for damage the insured does to others, so it does not repair the insured's own glass.

Rising flood water fills the insured's parked car and ruins it. Under a personal auto policy carrying both physical damage coverages, the loss is:

• a.Covered as an other-than-collision loss, less the deductible✓
• b.Excluded, because flood is excluded on all property forms
• c.Covered only if a separate flood policy is purchased first
• d.Covered as a collision loss, less the collision deductible

Water and flood are named other-than-collision causes of loss on the auto form, so a flooded car is settled as a comprehensive loss subject to that deductible. Homeowners and dwelling forms do exclude flood, which is why the choice calling flood universally excluded fails; auto physical damage is the exception. Federal flood insurance covers buildings and their contents, not cars.

Vandals scratch the paint and slash the seats of a parked car, causing $1,250 in damage. The auto carries a $250 other-than-collision deductible. The insurer pays:

• a.$1,000, as vandalism is other than collision✓
• b.$1,250, because vandalism carries no deductible
• c.$750, applying a $500 collision deductible instead
• d.Nothing, as vandalism is an excluded peril

Malicious mischief, vandalism and civil commotion are named other-than-collision causes of loss, so the comprehensive deductible applies: $1,250 - $250 = $1,000. Nothing about a deliberate act by a stranger triggers collision, so subtracting a $500 collision deductible for $750 misreads the declarations. Physical damage coverage is not voided because the damage was intentional on the vandal's part.

Physical damage coverage on a personal auto policy is best described as:

• a.Coverage every policy must include by federal law
• b.Coverage that pays the loan balance rather than value
• c.Optional coverage that a lienholder requires✓
• d.Coverage automatically added when a car is financed

Collision and other-than-collision are separate optional purchases, but a lender financing the car requires them and is shown as a loss payee on the declarations. There is no federal mandate to buy them; auto insurance requirements are set at state level. The insurer owes the value of the damaged auto, not whatever is left on the loan.

Repairing the insured's car after an at-fault collision would cost $9,400, but the car's actual cash value is $8,000. With a $500 collision deductible, the insurer pays:

• a.$8,000, the value of the car with no deductible taken
• b.$7,500, the actual cash value less the deductible✓
• c.$9,400, since the repair estimate sets the amount owed
• d.$8,900, the repair estimate less the deductible amount

Part D pays the lesser of the auto's actual cash value or the cost to repair or replace it with like kind and quality, so the $8,000 value caps this loss: $8,000 - $500 = $7,500. Paying the $9,400 estimate less the deductible would hand the insured more than the car was worth and breach indemnity. The deductible still comes off a total loss.

In one policy year an insured has a $2,000 hail loss and, four months later, a $3,000 collision loss. Deductibles are $250 other than collision and $500 collision. The insurer pays in total:

• a.$4,500, applying the $250 deductible to both losses
• b.$4,250, applying each coverage's own deductible once✓
• c.$4,750, since the second loss carries no deductible
• d.$4,000, applying the $500 deductible to both losses

Collision and other than collision are separate coverages with separate deductibles, and each loss is settled on its own. Hail is other than collision: $2,000 - $250 = $1,750. The collision loss pays $3,000 - $500 = $2,500, for $4,250 in all. Applying one deductible to both losses ignores which coverage each cause of loss falls under.

The insured's car is stolen and never recovered. Its actual cash value at the time of the theft is $14,000 and the other-than-collision deductible is $250. The insurer pays:

• a.$13,500, because the $500 collision deductible applies
• b.$13,750, the actual cash value less the deductible✓
• c.$14,000, because theft losses are paid in full
• d.The original purchase price of the car, less $250

Theft is an other-than-collision cause of loss, so that deductible comes off the auto's actual cash value: $14,000 - $250 = $13,750. Collision does not respond to a theft, so subtracting a collision deductible for $13,500 applies the wrong coverage. Actual cash value, not the price the insured once paid, measures a physical damage loss.

Actual cash value, the measure used to settle a physical damage loss, is:

• a.The dealer's advertised asking price for a like model
• b.Replacement cost at the time of loss, less depreciation✓
• c.The price the insured paid for the auto when new
• d.The amount still owed to the lender on the auto loan

Actual cash value is what it would cost to replace the auto today, reduced by depreciation for age, mileage and condition, and it caps what Part D pays. The loan balance is a debt between borrower and lender and measures nothing about the car, which is why gap coverage exists. Using the original purchase price ignores years of depreciation.

A car is stolen and recovered three days later with $4,300 in damage. The policy shows a $100 other-than-collision deductible and a $1,000 collision deductible. The insurer pays:

• a.$3,300, because a thief drove the car away
• b.$3,200, because both deductibles apply to the claim
• c.Nothing, because a recovered auto is not a real loss
• d.$4,200, because theft is other than collision✓

The cause of loss is the theft, an other-than-collision peril, so the $100 deductible applies to the damage found on recovery: $4,300 - $100 = $4,200. Subtracting the $1,000 collision deductible because a thief drove the car picks the wrong coverage for the same event. Recovery of the auto does not erase the loss; it changes the claim from a total to a repair.