3/C - Personal Auto Flashcards
The PAP (Personal Auto Policy)
A policy that combines liability insurance with other optional coverages
PAP Eligibility
PAP policies can cover:
- Individuals and residing family members
- People driving car with owner’s permission
- Four-wheeled vehicles under 10,000 lbs
Remember: insurable interest is required (i.e. auto owners, lessors, or lenders).
PAP Coverage
What is covered? The PAP will indemnify for: - Property damage - Bodily injury - Legal defense
PAPs will not pay punitive damages.
Insurer must defend policyholder against liability claims, in or out of court.
PAP Sections
- Declarations Page
- Six Sections:
a. Part A Liability
b. Part B Medical Payments
c. Part C Uninsured Motorist
d. Part D Coverage for Damage to Your Auto
e. Part E Duties After an Accident or Loss
f. Part F General Provisions - Endorsements
Declarations Page
- Named insured’s name and address
- Policy period
- Applicable insurance coverages and their limits
- Deductible
- “Loss payees” (all parties to be indemnified when losses occur)
- Make, model, and VIN of insured automobiles
- Endorsements added to the policy
How Deductibles Work
Auto Insurance Deductibles:
- Fixed: one specific, predetermined amount
- Per Claim basis: insured is responsible for paying this amount on every claim
Note: Deductibles typically only apply to Collision and Comprehensive coverages, not Liability.
You, Us, Family Member
You, Your
- The named insured and the insured’s spouse living in the same household
We, Us, Our
- The insurer providing the policy
Family member
- Any relation of the insured who lives in the insured’s household
Owned, The Use of, Occupying
Owned
- A car that the insured owns or has leased for 6 months
The Use of
- Any activity involving the car
Occupying
- Being in or on a vehicle, getting in or out, getting on or off, sitting on, or leaning against the vehicle
Bodily Injury, Property Damage
Bodily Injury
- Bodily harm, sickness, or disease, or the resulting death
- Does not include mental distress or psychological trauma
Property Damage
- Destruction of, or physical damage to, tangible property
- Includes the loss of use of damaged property
Business, Trailer
Business
- A trade, profession, or occupation
Trailer
- A vehicle designed to be towed
Your Covered Auto
- The car specified on declarations page
- A newly acquired auto
- A trailer that the insured owns
- A temporary substitute for car or trailer listed on dec page, due to:
a. breakdown
b. repair
c. servicing
d. loss
e. destruction
Newly Acquired Auto
Any new or used vehicle that the insured gets during the current policy period
A “newly acquired auto”:
- Must weigh less than 10,000 lbs
- May not be covered under another insurance policy
- May not be used for the transport of goods and materials (with some exceptions)
- Automatically gets the broadest coverage provided to any one car listed in policy
Adding Newly Acquired Autos
Reporting (according to the standard PAP):
Insured has 14 days to report newly acquired auto.
However: most states and insurers actually require that you report any new auto within 10 to 30 days
Comprehensive and Collision coverage:
- Can be added within 4 days of getting new car
- Automatically applies for first 4 days with $500 deductible
Note: These grace periods can vary by insurer.
Auto Liability Coverage
Part A - Liability Coverage
- Not for insured’s own injuries or damages
- Covers the insured’s liability for the injuries or property damage of others
- Defense in court is included, if necessary
Insuring Agreement
Establishes what the insurer will do for the insured if the insured becomes liable for losses:
- Pay liability costs, up to policy limits
- Covers injury or damage caused by “your covered auto” or any car the insured drives with permission
- Settle or defend liability lawsuits
- Insurer reserves the right to settle liability cases out of court
Covered Person
- The named insured and family members living in the same household
- Someone using covered auto with permission
Primary vs. Secondary Coverage
- Coverage is “primary” if it involves a car the insured owns.
- Coverage is “secondary” if it involves a car the insured does not own.
Out of State Provision
If you meet your home state’s requirements, it is assumed you meet the requirements of any other state.
Part A - Supplementary Payments
- Assist policyholder with a variety of accident-related expenses
- Not subject to liability limits
May include:
- Lost wages (due to court hearings): up to $250/day
- Expenses due to insurer’s request such as retrieving accident reports or records, copy fees
- Bail bonds: up to $250
- Accrued interest after a judgment is entered
- Premiums on appeal bonds and attachment bonds
Exclusions
Auto Liability coverage does NOT include:
- Intentional damage or injuries (e.g. vehicular assault)
- Property owned or being transported by the insured
- Damages incurred under the scope of employment, except domestic employees ineligible for workers’ comp
Exclusions, Cont’d
Auto liability coverage also excludes:
- Properties rented to or used by the insured (not including rented dwellings or private garages)
- Hired vehicle transporting people or goods (i.e. taxis)
- Company-owned business vehicles
- Damages or injuries caused while repairing, servicing, parking, or storing vehicles (i.e. mechanics, valets, vehicles released to storage facility)
- Vehicles taken without permission
- Damages or injuries arising from or related to a flying car
No-Fault Insurance
- Designed to indemnify the insured for his own injuries, regardless of fault
- Covers bodily injury only (usually not property damage)
- Mandatory in some states
Part B - Medical Payments
- Provides coverage for the insured
- Pays medical expenses of the insured et al, no matter who caused them
- Applies when anyone considered an insured under the policy is occupying or struck by auto or trailer designed for public roads
- Includes vehicle-pedestrian accidents
Part B - Insuring Agreement
- Says the insurer will pay for medical and funeral costs when an insured (i.e. anyone considered insured under the policy) is injured in an auto accident
- Covers eligible medical payments for up to three years
- Applies a single limit for each person per incident
Common limits: $500, $1,000, $2,000, $5,000, etc.
Covered Person
“Insured”
- The named insured or a family member
- Any person occupying “your covered auto”
Common Exclusions to Medical Payments
- Accidents where an insured is occupying a vehicle with fewer than four wheels
- Autos rented or leased for hire
- Autos used without permission (or reasonable belief of permission)
- Commercial vehicles covered by a Business Auto Policy (BAP)
- Vehicles located for use as a residence
- Injuries sustained under scope of employment (if covered by Workers’ Comp)
Medical payments begin only after Personal Injury Protection (PIP) coverage is fully exhausted.
Part C - Uninsured/Underinsured Motorist Coverage
- Covers bodily injuries caused by people with insufficient or no insurance
- Coverage for physical damage can be added by endorsement
Who Counts as Uninsured?
Uninsured Motorist (UM):
- Driver with no liability insurance
- Driver whose insurer won’t pay
- Hit-and-run driver
Underinsured Motorist (UIM): Driver who does not have enough insurance to pay for all damages
Part C - Insuring Agreement
Insurer agrees to pay for an “insured’s” injuries or damages caused by driver of an uninsured vehicle.
“Insured”:
- The named insured or a family member
- Anyone in a “covered auto” with permission
Exclusions to UM/UIM Coverage
- The insured’s own auto that is not listed in the policy
- Government vehicles
- Off-road vehicles (but only while not on public roads)
- Vehicles used as a premises
- Covered autos that are rented or used for hire (although the interpretation of this phrase varies)
- Cars used without reasonable belief that permission was granted
Part D - Damage to Your Auto
- Also called “Physical Damage”
- Protects the insured’s financial interest in her car
- Two types: Collision and Other Than Collision
- Often required by finance companies
Part D - Collision
- Pays for damage to insured’s vehicle caused by collision or rollover (a car that has been tipped or rolled over is known as an “upset vehicle”
- Applies even when insured is at-fault
- Includes “your covered auto” and any “non-owned” car the insured is driving (unless the insured borrows it frequently: then it is not covered)
Payment After a Collision
- Total damage: insurer pays ACV of the car at the time of collision
- Partial damage: insurer pays to repair the car with similar materials
- Transportation (car rental) expenses: $30/day, up to $900 (previous versions of the policy offered lower amounts: $20/day, up to $600)
Part D - Other Than Collision
- Also called Comprehensive Coverage
- Covers damages not caused by collision or overturn
- Essentially “open-peril” coverage, minus exclusions
Comprehensive Coverage Covered Perils
- theft
- hail, water, or flood
- windstorm
- fire
- vandalism
- explosion
- earthquake
- riot/civil unrest
- missiles or falling objects
- contact with birds or animals
Payment After a Loss
Same as Collision Coverage:
- Total damage: insurer pays ACV of the car at the time of collision
- Partial damage: insurer pays to repair the car with similar materials
- Transportation (car rental) expenses: $30/day, up to $900
Exclusions for Damage to Your Auto
- Normal wear and tear
- Freezing
- Mechanical or electrical breakdown
- Tire damage
- Government or civil confiscation
- Losses to non-owned autos taken without permission
- Losses involving any racing or speed event or facility
- Stereo equipment and electronics (unless permanently installed, then subject to limits)
- War and nuclear events
Personal Injury Protection (PIP)
Features of Personal Injury Protection:
- Covers injuries to the insured et al caused by an accident, no matter who was at fault
Advantages of No-Fault PIP
- Fewer lawsuits
- Helps contain rising automobile insurance costs
- First party rather than third party claims
- Quicker reimbursements
- Pays up to the policy limit without recourse
Who is Covered?
PIP pays for the bodily injuries of:
- The insured and members of household, whether in the insured’s or another vehicle
- Children of the insured while on a school bus
- Certain passengers without their own PIP
- Licensed drivers who drive the insured’s vehicle with permission
Coverage Details
After a covered accident, PIP will pay:
- Medical costs, sometimes up to a set percentage
- Lost wages (percentage of wages before injury)
- Medical transportation expenses
- In-home caregivers
- Death benefits
Primary vs. Excess
- PIP is primary coverage
- Medical Payments is secondary: it pays after PIP is exhausted
- PIP restricts insured’s right to go to court
Part E: The PAP - Duties After an Accident or Loss
- Report all accidents
- Cooperate with insurer’s investigation, settlement, and any court proceedings
- Promptly send the insurer copies of all pertinent legal papers
- Submit to a physical exam if insurer requests
- Submit to exam under oath (EUO) and verify that your statements are true and accurate
- Authorize the insurer to obtain medical reports
- Authorize the insurer to obtain other pertinent records
- Provide proof of loss if insurer requests
- Give a recorded statement whenever reasonably requested by the insurer
The insured has additional duties if policy includes:
- Part C-Uninsured/Underinsured Motorist
- Part D-Damage to Your Auto
Additional Duties for UM/UIM Claims
- Notify the police in the event of hit-and-run
2. If filing a lawsuit, forward legal documents to the insurer
Additional Duties for Collision or Comprehensive Claims
- Protect covered vehicles from further loss
- Promptly notify the police in the event of theft
- Allow insurer to inspect and appraise damaged vehicles
Policy Period and Territory
PAP coverage only applies to accidents and losses that occur:
- During the policy period
- Within the United States, its territories and possessions include Guam, Puerto Rico, military bases, embassies, etc.
- During shipment between ports in the policy territory
Mexico is not part of the policy territory.
Changes to Policy
Policy cannot be changed or waived without a written and signed endorsement.
Insurer may increase premiums immediately for:
- Changes to the number, type, or use of automobiles
- Changes in coverage, deductibles, or limits
- Address changes
- Changes in covered persons
For policies spanning more than one year, insurers may annually review the premium rate for the following year.
Insurer’s Rights to Recover Payment
- Enforces subrogation
- If insured is paid by both the insurer and at-fault party, excess funds must be paid back to the insurer
Subrogation does not apply to Part D Physical Damage.
Suspension of Insurance
Lets the insured suspend coverage and premium payments for a specified period of time.
Towing and Labor
- Pays for towing expenses, plus labor charges from the scene of the damage
- Per occurrence limit
Extended Non-Owned Coverage
- Liability and medical payments coverage for non-owned vehicles
- Covers non-owned vehicles carrying people or property for a fee
- Coverage only applies to the named insured
Customized Equipment
Provides extra coverage for valuable equipment that is not covered in standard policy
Miscellaneous Vehicle Coverage
Lets the policyholder add specialized vehicles to the policy, such as motorcycles, motorhomes, mopeds, etc.
Non-Owner Coverage
Provides liability, medical payments, and UM/UIM insurance for people who have no car, but who often borrow other people’s vehicles
