CAIA Policy Coverage and Exclusions 3

Question 1

A vehicle is declared a total loss. The insured still owes more on their auto loan than the vehicle's ACV. Which optional coverage bridges this gap?

Accepted Answer

GAP (Guaranteed Asset Protection) coverage

Answer

GAP coverage pays the difference between the vehicle's ACV settlement and the remaining loan or lease balance.

Question 2

Which exclusion prevents a standard auto policy from covering a vehicle used in a street race sanctioned by no official body?

Accepted Answer

Racing or speed contest exclusion

Answer

Auto policies universally exclude losses occurring while the vehicle is used in racing or speed contests.

Question 3

A family member not listed on the policy regularly drives the insured vehicle. Under the PAP, are they covered?

Accepted Answer

Yes, resident family members are typically covered as 'insureds'

Answer

The PAP's definition of 'insured' includes family members residing in the same household who use a covered auto.

Question 4

Which statement best describes the 'deductible' in auto physical damage coverage?

Accepted Answer

The amount the insured pays out-of-pocket before insurance pays

Answer

The deductible is the insured's portion of a covered loss paid before the insurer contributes.

Question 5

An insured's custom stereo worth $2,000 is stolen from the vehicle. The standard auto policy pays only $200. Why?

Accepted Answer

Non-factory installed equipment often has a sub-limit under standard policies

Answer

Standard PAPs typically limit coverage for custom or aftermarket equipment to a specified sub-limit unless a special endorsement is added.

(CAIA) Certified Automotive Insurance Adjuster Practice Test