Key Takeaways
- The Personal Auto Policy (PAP) has SIX parts: A (Liability), B (Medical Payments), C (Uninsured Motorists), D (Physical Damage), E (Duties), F (General Provisions)
- Covered vehicles include private passenger autos, pickups/vans under 10,000 GVW, and newly acquired vehicles (automatic coverage for 14-30 days)
- The Named Insured includes the person named on the policy PLUS their spouse if living in the same household
- Family members are automatically insureds when using ANY auto — covered, non-owned, or temporary substitute vehicles
- There are approximately 230 million registered vehicles in the U.S., and auto insurance is mandatory in 49 states (all except NH)
Personal Auto Policy Overview
The Personal Auto Policy (PAP) is one of the most common insurance policies in the United States. Understanding its structure and definitions is essential for the P&C exam.
The Six Parts of the PAP
The PAP is organized into six distinct parts:
| Part | Name | Coverage Type |
|---|---|---|
| Part A | Liability Coverage | Third-party |
| Part B | Medical Payments | First-party |
| Part C | Uninsured Motorists | First-party |
| Part D | Physical Damage | First-party |
| Part E | Duties After an Accident | Conditions |
| Part F | General Provisions | Policy administration |
Who Is a "Named Insured"?
The Named Insured consists of:
- The person named on the Declarations page
- Their spouse — if residing in the same household
Key Point: If the named insured and spouse divorce, the spouse loses insured status when no longer residing in the same household.
Who Is an "Insured" Under the PAP?
Different categories of people qualify as insureds:
For Owned Vehicles
| Person | Status |
|---|---|
| Named insured | Insured |
| Spouse (if resident) | Insured |
| Family members (resident) | Insured |
| Anyone with permission | Insured |
For Non-Owned Vehicles
| Person | Status |
|---|---|
| Named insured | Insured |
| Family members | Insured (with owner's permission) |
| Anyone else | NOT insured |
Definition: Family Member
A "family member" is a person related by blood, marriage, or adoption who resides in the same household.
Includes:
- Children living at home
- Parents living with you
- Relatives sharing your residence
Does NOT Include:
- Child away at college (check policy — many cover temporarily away)
- Divorced spouse
- Extended family not living with you
What Vehicles Are Covered?
"Your Covered Auto"
Vehicles shown on the Declarations, plus:
| Vehicle Type | Coverage |
|---|---|
| Vehicles on Declarations | Full coverage |
| Newly acquired vehicles | Automatic 14-30 days |
| Temporary substitute vehicles | Full coverage |
| Trailers | Liability only |
Newly Acquired Vehicles
Rules for Automatic Coverage:
| Coverage | Same Type Vehicle | Different Type Vehicle |
|---|---|---|
| Liability | Automatic | Automatic |
| Physical Damage | Automatic (if you had it) | Must notify insurer |
| Notification Period | Within 14 days (or 30) | Same |
Temporary Substitute Vehicles
If your covered auto is out of service for:
- Repairs
- Servicing
- Loss
- Destruction
A substitute vehicle borrowed or rented is covered with the same coverage as your own vehicle.
Vehicles NOT Covered
| Excluded Vehicle | Reason |
|---|---|
| Motorcycles | Requires separate policy |
| Vehicles with fewer than 4 wheels | Not private passenger auto |
| Vehicles used for public transportation | Commercial use |
| Vehicles used for rideshare (Uber/Lyft) | Commercial use |
| Vehicles owned by business | Commercial auto policy |
| Vehicles used in racing | Excluded activity |
GVW Limit
Pickups and vans must be under 10,000 pounds GVW (Gross Vehicle Weight) to qualify for personal auto coverage.
Mandatory Auto Insurance
Auto liability insurance is required in 49 states (all except New Hampshire).
Why It's Mandatory
- Protects innocent accident victims
- Ensures financial responsibility
- Required for vehicle registration
Proof of Insurance
Most states require:
- Insurance card in vehicle
- Electronic verification available
- Penalties for driving uninsured:
- Fines ($500-$5,000+)
- License suspension
- Vehicle impoundment
- SR-22 filing requirement
The Personal Auto Policy has how many parts?
A "family member" under the PAP must be related AND:
The named insured purchases a new car to replace their existing vehicle. Liability coverage on the new car is:
5.2 Part A: Liability Coverage
Continue learning