Unit 7 - Personal Lines: Automobile Insurance

Question 1

Combination Policy

Answer 1

A combination automobile policy provides several coverages under one form or contract and includes the following:

PART A: Liability Coverage (damage to others, and includes supplementary payments by default). This covers damage to others (i.e. BI and PD)

PART B1: Medical Payments Coverage

OR

PART B2: Personal Injury Protection Coverage (PIP), which pays medical expenses, loss wages, and essential services.

PART C: Uninsured and Underinsured Motorist. In order to pay out this coverage…

• Our insured has to be 0% at fault
• Liable party doesn’t have enough coverage to cover loss or has no insurance at all

PART D: Coverage for physical damage to your auto

Question 2

Permissive users

Answer 2

PERMISSIVE DRIVERS/USERS are defined as any person driving an insured car with the insured’s or spouse’s permission.

Question 3

Borrowed vehicles

Answer 3

Under the Personal Auto Policy (PAP), liability coverage is only extended to BORROWED VEHICLES when…

• The insured or the insured’s spouse gives the borrower permission to drive their vehicle.
• The vehicle’s owner’s insurance will be PRIMARY and the borrower’s insurance will be EXCESS (but once policy limit of primary policy is exceeded).

Question 4

PART A Liability Coverage under PAP

Answer 4

Under PAP, this provides coverage for bodily injury (BI) and property damage (PD) for which any insured becomes LEGALLY responsible (i.e. negligent) because of an auto accident.

Coverage may be purchased 2 ways…

1) SPLIT LIMITS of 30/60/25
- $30K is the most any one person will be paid as a result of any one accident
- $60K is the most BI liability paid as a result of any one accident, regardless of the # of BI claims (aka RESTORATION OF LIMITS).
- $25K is the most PD liability that will be paid for any one accident.

2) Combined single limit (CSL) of $85K… This combines the 2 per accident figures stated previously. It does not distinguish between BI and PD liability

Question 5

Define SUPPLEMENTARY PAYMENTS within the Part A Liability Coverage of a PAP.

Answer 5

The defense of the insured will be paid under the auto contract in addition to the limits of liability, it is not included in the supplementary payments section.

Another difference in the supplementary payments in auto policy is that the loss of earnings of the insured is only $200 per day

Question 6

Define OUT OF STATE CLAUSE within Part A Liability Coverage of a PAP.

Answer 6

If the insured is involved in an accident in a state that requires higher financially responsibility liability limits than Texas does, the policy will be interpreted to provide the higher limit (inverse isn’t true).

Question 7

To recover loss for lost income within Part B2: Texas Personal Injury Protection Coverage within a PAP, the insured must…

Answer 7

… be employed as a wage earner.

Question 8

To recover loss for essential services within Part B2: Texas Personal Injury Protection Coverage within a PAP, the insured must…

Answer 8

… be a non-wage owner (e.g. homemaker, student, retiree)

Question 9

Define PART C: Uninsured (UM)/Underinsured (UIM) Motorist Coverage under a PAP.

Answer 9

This extends coverage to those who suffer BI, PD, or both in an auto-related accident with an uninsured or underinsured motorist.

Question 10

Who can be considered an UNINSURED (UM) motorist?

Answer 10

1) Hit and run driver
2) Third party that is found at-fault of an accident, but whose liability coverage is suddenly void.
3) UM Coverage pays for compensatory BI and PDs for which the insured is legally entitled but unable to collect from the at-fault driver.

Question 11

Who can be considered an UNDERINSURED (UIM) motorist?

Answer 11

An underinsured motorist has liability coverage, but the limits of liabilities aren’t enough to cover the loss incurred by the 1st party motorist.

Question 12

What steps are taken to settle an UNDERINSURED (UIM) motorist claim?

Answer 12

• Because the UIM has insurance, his/her liability coverage pays first.
• If there is not enough insurance to provide indemnification, the insured (not the at-fault driver) may submit a claim to his own insurance company under the UIM coverage.

Question 13

What are the Texas minimum limits for UM/UIM coverage?

Answer 13

Split Limits: 30/60/25

• $30K per person for BI
• $60K per accident for BI
• $25K per accident for PD

Combined SINGLE LIMITS (CSL) = $85K per accident

Question 14

What determines the maximum limits that an insured carries under Coverage A (liability)?

Answer 14

The maximum limits are up to what the insured carries under their own Coverage A (liability) policy.

“Do onto others as you would do onto yourself”.

Question 15

In PAP, define PART D: COVERAGE FOR DAMAGE TO YOUR AUTO.

Answer 15

This is coverage purchased by the insured to indemnify for physical losses that have occurred to an insured’s car.

It is made up of…

• COLLISION COVERAGE, which is the upset of your vehicle or it’s impact (including rollovers) with another vehicle or object. Only covers the insured vehicle and always written with a deductible.
• OTHER THAN COLLISION (OTC), which is written with a deductible and provides protection for losses not covered by collision.

Question 16

Under Part D Coverage in PAP, which losses are NOT covered by COLLISION Coverage?

Answer 16

OTHER THAN COLLISION (OTC)

• Missiles or falling objects
• Fire, explosion, wind, or hail
• Theft of breakage of glass
• Flood or earthquake
• Riot of civil commotion
• V & MM
• Contact with a bird or other animal.

Question 17

What is one exclusion not covered under a PAP?

Answer 17

The operation of vehicles used as a livery conveyance, such as a limo, taxi, courier, delivery, and so forth (i.e. Uber, Lyft, DoorDash).

Question 18

What are the DUTIES of the INSURED after an auto-related loss?

Answer 18

Submit a PROOF OF LOSS form to the insurer within 91 days when required (i.e. 91 days from the date the adjuster mails this document to insured)

The insured should NEVER…

• Admit fault
• Make a partial payment (this admits fault)

Question 19

Per the GENERAL PROVISIONS section within a PAP, how is an auto claim settled?

Answer 19

The auto claim is usually settled by using the actual cash value (ACV) method in one of the following days:

• TOTALING THE VEHICLE using the appropriate formula (occurs when the cost of repair and salvage value of a vehicle is GREATER than the ACT)
• REPAIRING THE VEHICLE
• REPLACING THE VEHICLE

** NOTE: If insured doesn’t surrender the title of the vehicle, the salvage value of the vehicle is deducted from the final claim settlement amount.

Question 20

What are 2 other key GENERAL PROVISIONS of a PAP under Section F?

Answer 20

1) APPRAISAL process is used when insured and insurer don’t agree on dollar amount of final settlement.
2) There is no coverage for BAILEES. Bailees are covered under the Garage Coverage Form.

Question 21

Bailee.

Answer 21

A bailee is a person or business that has voluntary possession of another person’s property (e.g. auto repair shop).