Question

Which of the following is NOT a nearly universal condition of a PAP policy?

A. The insured must cooperate with the insurer during the investigation process
B. The insured must allow the insurer to inspect a vehicle during a claims process
C. The insured must file a report for hit and run accidents with the police
D. The insured must actively avoid parking in high crime areas

Answer 1

The correct answer is that the insured is not universally required to avoid parking in high crime areas as part of a Personal Auto Policy (PAP). Conditions like cooperation during investigations and vehicle inspections are standard requirements.

Step-by-step explanation:

The question is asking which of the listed conditions is not generally required by a Personal Auto Policy (PAP). After reviewing the conditions, the answer is that D. The insured must actively avoid parking in high crime areas is NOT a nearly universal condition of a PAP policy.

The conditions such as cooperating with the insurer during the investigation process, allowing the insurer to inspect a vehicle during a claims process, and filing a report for hit and run accidents with the police are standard requirements.

Car owners purchasing car insurance know their driving habits better than the insurance company, which could lead to a discrepancy in risk assessment. Insurance markets face problems like moral hazard and adverse selection, which arise due to imperfect information about the insured's risk level.