Maine Personal Lines Insurance License Exam — All Questions

On the standard personal auto form, transportation expenses after a covered physical damage loss are limited to:

• a.The full daily cost of a comparable rental car
• b.$20 a day until the repairs are finished
• c.$30 a day, up to a $900 maximum per loss
• d.$20 a day, up to a $600 maximum per loss✓

The unendorsed form pays temporary transportation expenses of $20 per day, up to $600 for the loss. Full rental cost describes a rental reimbursement endorsement bought for a higher limit, not the built-in grant. Because both the daily figure and the cap are fixed, a long repair can exhaust the $600 while the car is still in the shop.

An insured's covered auto is stolen and returned to use 22 days later. On the standard form, transportation expense coverage pays:

• a.$600, the maximum, because theft claims are capped
• b.$400, since the 48-hour wait leaves 20 covered days✓
• c.$440, counting every day the car was missing
• d.Nothing, since stolen autos have no transport benefit

For a total theft, transportation expense coverage begins 48 hours after the theft and ends when the auto is returned to use or the insurer pays for the loss. Twenty covered days at $20 is $400, under the $600 cap, so paying the maximum overstates it. Counting all 22 days ignores the waiting period written into the form.

The insured borrows a neighbor's car and damages it in a collision costing $3,000. The insured's own two autos carry $250 and $500 collision deductibles. Part D pays:

• a.$2,500, using the larger deductible on the schedule
• b.Nothing, since a borrowed car is not a covered auto
• c.$2,625, averaging the two deductibles on the policy
• d.$2,750, using the broadest owned-auto coverage✓

Coverage for a non-owned auto is the broadest coverage applying to any auto shown in the declarations, so the $250 deductible governs: $3,000 - $250 = $2,750. Choosing the $500 deductible applies the narrower of the two, and averaging deductibles is not a policy provision. Part D does reach a car driven with the owner's permission.

Which vehicle qualifies as a non-owned auto for Part D purposes?

• a.A customer's car driven by the insured, a mechanic
• b.A friend's sedan borrowed for a weekend with permission✓
• c.A company car furnished to the insured for regular use
• d.A pickup the insured owns but left off the policy

A non-owned auto is a private passenger auto, pickup, van or trailer not owned by or furnished for the regular use of the insured or a family member, used with permission, so a borrowed weekend car fits. A vehicle furnished for regular use falls outside that definition, and a customer's car handled in the auto business is excluded from Part D. An owned auto left off the declarations is not non-owned; it simply has no coverage.

The transmission on the insured's car fails from age and the repair bill is $3,600. Deductibles are $500 collision and $250 other than collision. Part D pays:

• a.$3,100, the repair cost less the collision deductible
• b.$3,600, because the car became undriveable in service
• c.Nothing, as wear and breakdown are excluded✓
• d.$3,350, the repair cost less the comprehensive amount

Part D excludes damage due and confined to wear and tear, freezing, and mechanical or electrical breakdown, so an aging transmission is a maintenance cost rather than an insured loss. Neither deductible answer applies, because no covered cause of loss triggered the claim at all. The exclusion gives way only when such damage results from a total theft of the auto.

A pothole shreds a tire on the insured's car. Under Part D the tire itself is:

• a.Covered in full, since tires are permanently attached
• b.Covered as an other-than-collision road hazard loss
• c.Excluded, as road damage to tires is not covered✓
• d.Covered as a collision loss above the deductible

Road damage to tires sits with wear and tear, freezing and mechanical breakdown in the Part D exclusions, so the tire alone is the owner's expense. If the same pothole bends a wheel and a control arm, that impact damage is a collision loss subject to the deductible, which is why treating the whole claim as a comprehensive road hazard is wrong. The exclusion is lifted when the damage results from a total theft.

Damage to the insured's own auto is excluded under Part D while that auto is being used:

• a.To tow a small utility trailer to a dump
• b.On a long trip outside the home county
• c.In a share-the-expense car pool trip
• d.To carry persons or property for a fee✓

Physical damage is excluded while the auto is used as a public or livery conveyance, meaning carrying people or goods for hire. A share-the-expense car pool is expressly carved out of that exclusion, so commuters splitting fuel costs keep their coverage. Distance driven and towing a small trailer do not suspend Part D.

Under an unendorsed personal auto policy, custom furnishings or equipment in a pickup or van are:

• a.Covered without any limit as part of the auto
• b.Excluded unless coverage is added by endorsement✓
• c.Covered up to the full value of the vehicle itself
• d.Excluded even if an endorsement is later added

Bars, special carpeting, height-extending roofs and custom murals in a pickup or van are excluded from Part D unless a custom equipment endorsement schedules them. Sound-reproducing equipment is treated the same way when it is not permanently installed in the auto. Saying no endorsement can restore the coverage is wrong, since insurers write the equipment back for extra premium.

An insured who has a personal auto policy also drives a company car available for regular use. Liability for that vehicle can be added by:

• a.The towing and labor costs coverage endorsement
• b.A named non-owner policy written for the driver
• c.The miscellaneous type vehicle endorsement form
• d.Extended non-owned coverage for a furnished vehicle✓

The unendorsed policy excludes a vehicle furnished or available for the regular use of the insured, and extended non-owned coverage buys that exposure back by endorsement. A named non-owner policy is written for a person who owns no auto at all, so it does not fit a driver who already carries a personal auto policy. Towing and miscellaneous type vehicle endorsements address unrelated exposures.

After an auto accident, the duties condition in Part E requires the insured to:

• a.Repair the vehicle before the insurer inspects it
• b.Settle with the other driver, then bill the insurer
• c.Give prompt notice and send copies of legal papers✓
• d.Report only losses larger than the deductible used

Duties after an accident or loss include prompt notice of how, when and where it happened, cooperation with the insurer, and forwarding every legal paper or demand received. Repairing before inspection defeats the insurer's right to see the damage, and settling with the other driver first prejudices the defense the insurer owes. Small losses are still reported even if nothing ends up being paid.

When the insured's covered auto is stolen, Part E specifically requires the insured to:

• a.Wait ten days before reporting the loss to anyone
• b.Buy a replacement auto before a claim can be filed
• c.Notify the police and protect the auto from harm✓
• d.Sign over the title before any police report is made

Part E adds two duties for a physical damage loss: notify the police when the auto is stolen, and take reasonable steps to protect the auto and its equipment from further damage. Buying a replacement is not a condition of filing, and title transfer follows a total-loss settlement rather than preceding the police report. A self-imposed waiting period conflicts with the duty of prompt notice.

At the insurer's request, a person seeking coverage under Part E may be required to:

• a.Accept the first repair estimate the insurer obtains
• b.Pay the adjuster's travel costs to inspect the auto
• c.Waive the right to hire an independent appraiser
• d.Submit to a physical exam and an exam under oath✓

A person seeking coverage must submit to physical examinations by doctors the insurer chooses, as often as reasonably required, submit to examination under oath, and file a sworn proof of loss when asked. These are conditions of the contract, so refusing them can defeat the claim. The policy does not make the insured fund adjusting expenses or give up the appraisal process.

The policy territory of a personal auto policy covers accidents that occur in:

• a.Only within the state shown on the declarations page
• b.Any country the insured drives to while on vacation
• c.The United States, its territories, Puerto Rico, Canada✓
• d.The United States and any nation that borders it

The territory clause reaches the United States of America, its territories and possessions, Puerto Rico and Canada, and it follows the auto while it is being transported between their ports. Mexico borders the United States but lies outside the territory, which is why the answer naming bordering nations fails and why drivers buy separate coverage there. Coverage is not confined to the home state either.

The insurer pays a $6,000 collision claim and then pursues the at-fault driver for that money. This right is called:

• a.Salvage, the insurer's right to sell the damaged car
• b.Subrogation, the insurer's right to recover payment✓
• c.Appraisal, a method of settling a value dispute
• d.Abandonment, the insured's right to hand over the car

Under the general provisions the insurer that pays a loss steps into the insured's place against the party responsible, and the insured must sign papers and do nothing to impair that right. Salvage is the insurer taking the damaged property it paid for, not a claim against the wrongdoer. Appraisal settles a disagreement over the amount of a loss, and property cannot simply be abandoned to the insurer.

Two personal auto policies issued to the same named insured by the same insurer apply to one accident. The maximum payable is:

• a.The highest limit under any one policy✓
• b.The lower of the two limits shown on the policies
• c.Half the limit of each policy, added together
• d.The sum of the limits shown on both of the policies

The general provisions state that when two or more auto policies issued by the insurer to the named insured apply to the same accident, the maximum limit is the highest applicable limit under any one policy. That wording blocks stacking, so adding the two limits together overstates what is owed. It does not cut the recovery down to the smaller of the two limits either.

Under the general provisions, the insured may not bring legal action against the insurer until:

• a.The insured has complied with the policy terms✓
• b.The insurer has denied the claim twice in writing
• c.An independent appraiser has valued the whole loss
• d.A regulator has reviewed the claim file

The legal action condition bars suit against the insurer until the insured has complied with all the terms of the policy, which is why the Part E duties carry so much weight. A second written denial and a regulator's review of the file are not preconditions the contract sets. Appraisal resolves a dispute over the amount of a loss and is not a gateway to every lawsuit.

The towing and labor costs endorsement on a personal auto policy pays for:

• a.The full cost of any roadside service, without limit
• b.Towing and labor done at the place of disablement✓
• c.A rental car while the disabled auto is in the shop
• d.Engine repairs completed later at a repair garage

The endorsement covers towing plus the labor performed where the auto became disabled, up to the limit shown on the declarations. Work done after the car reaches the garage is the owner's expense, so naming engine repairs puts the claim on the wrong side of that line. A substitute car is transportation expense coverage, a separate grant, and the endorsement carries a stated limit.

A driver who owns no vehicle but often rents and borrows cars should be sold:

• a.A gap policy covering the borrowed car's value
• b.A miscellaneous type vehicle endorsement instead
• c.A named non-owner policy in that driver's name✓
• d.A towing and labor endorsement for rental cars

A named non-owner policy provides liability and related coverages to an individual with no owned auto, following that person into cars rented or borrowed. It schedules no vehicle, so it is not the same as an endorsement written for a motorcycle or motor home. Gap coverage answers a loan balance, which a driver who owns no car does not carry.

To bring a motorcycle or a motor home under a personal auto policy, the producer adds:

• a.An extended non-owned coverage endorsement form
• b.A named non-owner policy naming the rider only
• c.A towing and labor costs endorsement for the unit
• d.A miscellaneous type vehicle endorsement✓

The miscellaneous type vehicle endorsement schedules units the unendorsed policy is not written for, such as motorcycles and motor homes, and applies the policy's coverages to them. Extended non-owned coverage deals with a vehicle furnished for the insured's regular use, not with a scheduled recreational unit. Towing coverage adds a service benefit rather than the underlying grant.

A financed car is totaled. The auto policy pays its actual cash value of $18,500 while $22,000 is still owed on the loan. Gap coverage would pay:

• a.$3,500, the shortfall on the loan balance✓
• b.Nothing, because auto loans are not insurable at all
• c.$18,500, a second payment equal to the car's value
• d.$22,000, the loan balance, in place of the insurer

Part D owes actual cash value, so after the claim the borrower still owes $22,000 - $18,500 = $3,500. Gap coverage is designed to pay that difference; it neither duplicates the physical damage payment nor replaces it with the whole loan balance. Treating the shortfall as uninsurable ignores a product lenders commonly offer when the car is financed.