Insurance Car Insurance 4 — Questions and Answers
Question 1: Under what circumstance can an insurer legally cancel your car insurance policy mid-term?
- You moved to a different zip code
- Your credit score dropped slightly
- Your driver's license was suspended (Correct answer)
- You added a vehicle to the policy
Correct answer: Your driver's license was suspended
A license suspension is a material change in risk that gives most insurers legal grounds to cancel coverage mid-term.
Question 2: What is 'rental reimbursement coverage' in a car insurance policy?
- Coverage that pays your monthly car payment if you lose your job
- An add-on that pays for a rental car while your vehicle is being repaired after a covered claim (Correct answer)
- A policy that covers damage to rental cars you borrow
- Insurance required by rental car companies
Correct answer: An add-on that pays for a rental car while your vehicle is being repaired after a covered claim
Rental reimbursement coverage pays up to a daily limit for a rental car while your own vehicle is out of service due to a covered loss.
Question 3: Which of the following vehicles typically requires a separate 'classic car' policy rather than a standard auto policy?
- A 3-year-old sedan used for daily commuting
- A 25-year-old restored muscle car driven occasionally to shows (Correct answer)
- A pickup truck used for both work and personal use
- A hybrid vehicle with a high purchase price
Correct answer: A 25-year-old restored muscle car driven occasionally to shows
Classic and collector cars appreciate over time and are used differently than daily drivers, so they need specialized agreed-value policies.
Question 4: What is 'medical payments coverage' (MedPay) in auto insurance?
- Coverage that pays other drivers' medical bills when you are at fault
- Coverage that pays your medical bills regardless of who caused the accident (Correct answer)
- A replacement for health insurance while in your vehicle
- Coverage for lost wages after a car accident
Correct answer: Coverage that pays your medical bills regardless of who caused the accident
MedPay covers medical expenses for you and your passengers after an accident, regardless of fault.
Question 5: If you move to a new state, what should you do regarding your car insurance?
- Keep your existing policy; coverage transfers automatically nationwide
- Notify your insurer and update the policy to meet the new state's minimum requirements (Correct answer)
- Cancel your policy and go without coverage until you settle in
- Only update your address but make no coverage changes
Correct answer: Notify your insurer and update the policy to meet the new state's minimum requirements
Each state has its own minimum coverage requirements, and your insurer must be notified of address changes to ensure compliance and accurate rating.
Question 6: Which type of car insurance covers damage to your car caused by a tree falling on it during a storm?
- Collision
- Liability
- Comprehensive (Correct answer)
- Uninsured motorist property damage
Correct answer: Comprehensive
Comprehensive coverage pays for non-collision damage, including fallen trees, hail, fire, theft, and other acts of nature.
Question 7: What is a 'non-owner' car insurance policy used for?
- Insuring a vehicle you own but rarely drive
- Providing liability coverage for someone who drives but doesn't own a car (Correct answer)
- Covering damage to rental cars on vacation
- Insuring a company-owned fleet vehicle for personal use
Correct answer: Providing liability coverage for someone who drives but doesn't own a car
Non-owner policies provide liability coverage when you drive cars you don't own, such as rentals or borrowed vehicles.
Insurance Car Insurance 4
Under what circumstance can an insurer legally cancel your car insurance policy mid-term?