Personal Auto Policy Practice Exam 2025 – Comprehensive Test Prep

The correct answer is based on the understanding of how a Personal Injury Protection (PIP) and Property Damage (PD) policy typically operates in relation to the status of the insured vehicle. When a vehicle is deemed totally destroyed, it indicates that the vehicle has sustained damage beyond repair, rendering it inoperable and unfit for use. In such cases, the owner has a strong reason to cancel the insurance policy since the vehicle is no longer in existence or operable.

The term "totally destroyed" refers to the complete loss of the vehicle's utility, which accelerates the decision to cancel the associated policy. This reason aligns with standard practices in auto insurance, where the need for coverage is contingent upon the vehicle being actively in use.

In contrast, while a vehicle that is "lost," "damaged," or "out of service" might present varying circumstances, these situations do not inherently justify cancellation of the PIP/PD policy. A vehicle can be lost or damaged but may still be repairable or recoverable, thus retaining the necessity for insurance protection. Similarly, a vehicle that is out of service might still have potential for being returned to operational status, meaning the coverage would still be relevant during that period. Therefore, "totally