State Farm Auto Insurance Practice Test

What should be reviewed with the prospect when determining eligibility?

1. Prospect's credit score

2. Vehicle purchase history

3. Loss History Report and Motor Vehicle Record

4. Prospect's income level

The correct answer is: Loss History Report and Motor Vehicle Record

When determining eligibility for auto insurance, it is crucial to review the Loss History Report and Motor Vehicle Record. These documents provide insights into the prospect's past driving behavior and claims history, which are significant indicators of risk for the insurance company. The Loss History Report outlines any previous claims made by the individual, allowing the insurer to assess how often the prospect has filed for insurance claims and the nature of those claims, such as accidents or theft. The Motor Vehicle Record contains information regarding the prospect's driving violations, license status, and accident history. This record helps the insurance company evaluate the prospective policyholder’s driving habits and overall risk level. A clean driving record with minimal claims generally suggests a lower risk, which can lead to more favorable insurance terms. Conversely, a record rife with infractions might indicate higher risk, influencing eligibility or premium rates. While credit scores, vehicle purchase history, and income levels are important aspects in the broader context of underwriting and underwriting guidelines, they do not directly reflect the risk associated with the individual’s driving behaviors, which is paramount in determining eligibility for auto insurance.