Insurance Car Insurance 2 — Questions and Answers
Question 1: What does 'uninsured motorist coverage' protect you against?
- Damage from weather events
- Accidents caused by drivers with no insurance (Correct answer)
- Mechanical breakdowns
- Theft of your vehicle
Correct answer: Accidents caused by drivers with no insurance
Uninsured motorist coverage pays for your injuries and damages when the at-fault driver has no liability insurance.
Question 2: Which factor most commonly causes car insurance premiums to increase after a policy renewal?
- Adding a new driver to the policy (Correct answer)
- Paying premiums on time
- Increasing your deductible
- Removing a vehicle from the policy
Correct answer: Adding a new driver to the policy
Adding a new driver, especially a young or inexperienced one, typically raises premiums due to increased risk.
Question 3: What is the purpose of a 'declarations page' in a car insurance policy?
- It lists exclusions and things not covered
- It summarizes key policy details like coverage types and limits (Correct answer)
- It explains the claims filing process
- It contains the legal terms and conditions
Correct answer: It summarizes key policy details like coverage types and limits
The declarations page is a summary document showing the insured, vehicle, coverage types, limits, and premium amounts.
Question 4: Under a standard auto policy, which situation would typically NOT be covered by collision coverage?
- Hitting a guardrail
- Rear-ending another vehicle
- Flood damage to your car (Correct answer)
- Rolling your car in a single-vehicle accident
Correct answer: Flood damage to your car
Flood damage is a comprehensive claim, not a collision claim, because it results from a natural event rather than a crash.
Question 5: What does 'subrogation' mean in the context of car insurance?
- The insurer's right to recover costs from the at-fault party after paying your claim (Correct answer)
- The process of canceling a policy mid-term
- A discount given for bundling multiple policies
- The transfer of coverage to a new vehicle
Correct answer: The insurer's right to recover costs from the at-fault party after paying your claim
Subrogation allows your insurer to sue the at-fault driver or their insurer to recoup money paid out on your behalf.
Question 6: If you lend your car to a friend and they cause an accident, which insurance policy typically pays first?
- The friend's own auto policy
- Your auto policy (Correct answer)
- The other driver's policy
- Neither policy covers borrowed vehicles
Correct answer: Your auto policy
In most states, insurance follows the car, so the vehicle owner's policy is primary when someone borrows the car.
Question 7: What is 'gap insurance' designed to cover?
- Medical costs not covered by health insurance
- The difference between your car's ACV and the loan balance if it's totaled (Correct answer)
- Rental car expenses while your car is being repaired
- Deductible amounts you owe after a collision
Correct answer: The difference between your car's ACV and the loan balance if it's totaled
Gap insurance covers the shortfall between the actual cash value an insurer pays and what you still owe on your auto loan.
Insurance Car Insurance 2
What does 'uninsured motorist coverage' protect you against?