Chapter 6 - Auto Insurance Flashcards
When must motor vehicle owners show proof of financial responsibility?
When requested by a law enforcement officer When involved in an accident When renewing drivers license When getting a safety inspection When renewing a vehicle registration
Texas Motor Vehicle Safety Responsibility Act (1982)
Requires all owners of motor vehicles to prove financial responsibility in the event of an accident.
Law requires owners to maintain limits of 30/60/25 or 85 for a combined single limit.
Insurance companies provide ID cards to show this proof.
Surety bonds, self-insurance certificate issued by the DPS or State Treasurer or a deposit of cash in the amount of $85,000.
SR22
Usually required for no insurance or DWI violations.
A document that the insurance company files with the state to provide proof that a operator has insurance.
If the policy is canceled, the insurance company must notify the state. The state responds by suspending the operators driving license.
Texas Automobile Insurance Plan Association
Assigned risk
Provides insurance to those who in good faith are entitled to automobile liability insurance, but are unable to obtain it through authorized insurance carriers.
Individuals must have been rejected by at least 2 insurance companies in the voluntary market.
Insurers are only required to write he following min/max limits of liability: 30/60 BI 25 PD 2.5 PIP per person 30/60 uninsured motorist BI 25 uninsured motorist PD
Rate are higher than voluntary market.
What does the declarations section of the Personal Auto Policy (PAP) do?
identifies the insured
Describes the insured auto(s)
Lists attached endorsements
Summarizes coverages, limits and premiums
Other items are the insurer, policy number and policy period
What does the definitions section of the policy do?
Clarifies terms used in the policy to ensure the policy is not ambiguous.
Who is the “named insured”?
Includes spouse, if a resident relative
What is a “family member”?
A person related by blood, marriage, or adoption who lives in the household.
What does “occupying” mean?
In, upon, getting in, out, on or off the auto
What does “trailer” mean?
A vehicle designed to be pulled by a covered auto
What does “your covered auto” mean?
- Vehicle(s) listed in the decorations
- Trailer(s) owned by the insured
- Newly acquired additional vehicle (automatic coverage for 30 days with the broadest coverage currently listed on the declarations)
- Newly acquired replacement vehicle (all liability coverages are automatic for remainder policy period. Physical damage coverages have a 30 day limit)
- Vehicle or trailer used as a temporary substitute due to breakdown, repair, servicing, or loss of covered auto (borrowed vehicle or rented car)
What does “owned” mean?
Vehicle owned by insured, spouse, co-owned with a resident relative, or a long term lease
What does “non-owned” mean?
A vehicle owned (titled) by someone else, but used by our insured within the scope of the owner’s permission and. It used by our insured on a regular basis.
What is a “temporary substitute”?
A vehicle that takes the place of the insured’s regular auto when it is disabled.
Personal Liability
Liability coverages apply if a covered person becomes legally responsible for bodily injury or property damage as the result of an auto accident.
Does NOT cover the insured.
Who is covered while driving a covered auto on a personal policy?
Named insured, resident spouse, and resident family members
Any person who has a reasonable belief they have permission
Exclusions to Liability Coverage on a personal auto policy
- Intentional injury
- Property damage to property in the care, custody or of the insured with the exception of damage to a landlord’s residence garage or non-owned auto used by a covered person such as a rental car or borrowed vehicle.
- Injury to a employee with the exception of a domestic employee
- Vehicles with less than four wheels
- Owned vehicles not listed on the policy and owned for more than 30 days
- Used for business purposes unless listed on policy
- Racing
Supplementary Payments
Paid in addition to the limits of liability.
Some of these benefits are:
Defense costs
Premium on bonds
$200 per day for loss earnings of the insured is required to appear in court.
Out of state coverage
If a covered auto is operated out of state, the PAP automatically provides the minimum liability requirements for that particular state.
Liability limits will never decrease, can only increase.
Medical Payments Coverage
Provides for medical and funeral expenses for the insured, family members, and passengers while occupying a motor vehicle or as a pedestrian when struck by a vehicle.
Must file claim within 3 years from date of accident.
Minimum coverage is $500 and is applied on a per person basis.
What does Personal Injury Protection (PIP) provide?
Benefits to covered persons in a vehicle or as a pedestrian, including passengers within the insured vehicle without regard to fault or negligence. Coverage is provided on a per person basis for:
- Medical, rehabilitation or funeral expenses incurred with 3 years of the accident
- 80% of actual income lost if an income producer or reimbursement of essential services usually performed by the injured person if they are not an income producer.
PIP Option Form on personal auto policies
Insurance companies must offer PIP on Personal Auto Policies (PAP).
Must sign a option form to not have it.
Uninsured/Underinsured Motorists
You CANNOT be at fault.
Pays for bodily injury or property damage to an insured driver who is by by someone with no insurance or insufficient limits of coverage.
Will only pay for loss of:
*a driver with no liability insurance hits the insured
*the insured was involved in a hit and run accident
*the insurance company of the at fault driver denies the claim or is insolvent
*the at fault driver carries insufficient limits of coverage (underinsured)
UM/UIM Bodily Injury pays?
For our insured’s and passengers medical, hospital, and funeral expenses when hit by someone with no insurance or insufficient limits of coverage.
Also includes general damages.
What does UM/UIM Property Damage cover?
This pays for the insured’s vehicle when hit by an uninsured or underinsured motorist.
Also includes coverage for rental car and damage to our insured’s property.
Subject to a $250 deductible.
UM/UIM Option Form on personal auto policy
Texas requires insurance companies to offer UI/UIM coverage.
Insured may waive this coverage by signing an option form.
What does collision coverage cover?
Provides protection for damage to the covered auto by collision with another object or by overturn (upset) of the auto.
Coverage is subject to a deductible that the insured selects.
What does Other than Collision (comprehensive) coverage cover?
Provides coverage for any cause of loss other than collision or overturn.
All losses are subject to a deductible.
Most common losses claimed under this coverage are vandalism, theft, and weather damage.
Transportation Expense
T.E.
A physical damage extension that is included at no extra charge when the insured has other than collision coverage.
Provides $20 per day / $600 per month for expenses incurred by the insured due to a TOTAL THEFT.
Coverage begins 48 hours after car is reported stolen.
Police must be notified.
No trucks regardless of size
What damages can be covered by either collision or comprehensive?
Glass breakage, falling objects, a missile, hitting a bird or animal.
Deductibles
Are usually selected separately for collision and other than collision coverages.
Collision deductibles are usually $250 or higher
Other than collision deductibles are usually no higher than $250
Exclusions to Physical Damage Coverages
- while the vehicle is used to carry people or property for a fee
- wear & tear, freezing, mechanical breakdown or road wear to tires
- sound reproduction equipment, unless permanently installed (limit $1,500)
- tapes, CDs, etc
- camper or trailer not listed in the decelerations
- temporary substitute (rental car); covered under PD
- TV antennas, awnings, etc
- CB radio, radar detector, phone; unless permanently installed
- Custom furnishings; unless charged a premium (custom vans, pickups)
- while racing
- government destruction or confiscation
Duties after an Accident or Loss
- prompt notice to insurer of facts of accident
- cooperate in investigation, settlement and defense efforts
- submit copies of all legal papers
- submit proof of loss within 90 days
- notify police of hit and run or theft occurrences
- permit the insurer to inspect and appraise property
- protect the vehicle from further loss (mitigate damages)
Cancellation / Non-Renewal
If a PAP is in effect for more than 60 days the insurer may cancel midterm only for the following reasons:
Non payment of premium
Fraudulent claim
Suspension or revocation of the driver’s license of the named insured or regular operator, unless the insured accepts a named driver exclusion for the policy.
Notice Required on a Personal Auto Policy (PAP)
For new business (less than 60 days), the insurer must give a 10 day notice of cancellation
The insurer must give a 10 day notice of cancelation to the insured for non-payment of premium
The insurer must give a 30 day notice for non-renewal
Loss Payment
Insurer will replace/repair/restore property using the least expensive method
Assignment
Policy is non-transferable
How are policy terms changed?
Only by endorsement
What is the policy period?
All policies start and end at 12:01 AM
Liberalization
No additional charges can be made to the insured due to changes made by the company or the TDI
Subrogation
The insured cannot collect twice
The insured gives the insurer the right to go after the negligent party after the insured is paid.
Business Auto Policy (BAP) Liability BI & PD
Liability covers damages the insured is responsible for under bodily injury or property damage.
Normally written on a combined single limit basis.
Minimum is 85K
PIP and Uninsured Motorist on Business Policy
These are only offered as an endorsement on BAP
Exclusions to liability on Business Auto Policies
Intentional injury
Employee injury
Property in the insured’s care custody or control
Damage to property while it’s being loaded or unloaded
Pollution
Specified causes of loss
Is an alternative to comprehensive on BAP
Provides coverage for named perils; fire/lightning, explosion, theft, flood, hail, earthquake, and vandalism.
No deductible for any loss except vandalism, where a $25 deductible applies
Business Auto Cancellation / Non-Renewal
If a BAP is in effect for more than 60 days the insurer may cancel midterm for:
Non-payment of premium
Fraudulent claim
Suspension or revocation of drivers license or motor vehicle registration
Notice required on Business Auto Policy
Insurer must give 10 days cancellation notice to an applicant who is new business (less than 60 days)
Insurer must give 10 day notice of cancellation to the insured for non payment of premium
Insurer must give 60 day notice for non-renewal
Mobile Equipment
Bulldozers, farm machinery, forklifts, vehicles on crawler treads, or vehicles principally used off public roads
Are not covered
BAP will cover mobile equipment for liability while being towed or carried by auto
Garage Policy
Is designed for the specialized risk of businesses that sell, service, repair, store, or park autos.
What is a supplementary schedule used for in garage policies?
Shows if the company being insured is an auto dealer or non-dealer
Garage Policy - Liability - Premises & Operations
Protects the insured against liability as a result of them assuming responsibility for what happens on the premises or for actions that are part of the regular garage operations.
Example: if a visitor slips and falls while on the premises
Garage Policy - Liability - Products and Completed Operations
Protect the insured against liabilities arising out of products or services that are supplied as a result of the garage business.
Example: if my repair work destroyed your engine
Exclusions to garage liability
- property in the insured’s care, custody or control
- an employee’s injury (workers compensation)
- pollution
- racing or stunting
- loss of use due to the insured’s delay
Garage Keepers
Adds physical damage coverage to property that isn’t owned but is under the care, custody or control of
3 coverage options
- comprehensive
- specified causes of loss
- collision
Exclusions to Garage Keepers
Theft by employee
Defective product or faulty work
Loss of tape decks, CD players, etc
Garage Operations
Ownership, maintenance, or use of locations for garage business, was well as the portion of road or access that adjoin these locations.
This includes all options necessary to garage business including ownership, maintenance and the use of autos.
