Insurance Planning | V. Personal Auto Policy

Many accident victims are unable to recover damages due to numerous reasons such as the the negligent driver may be uninsured or underinsured. States use a number of approaches to protect accident victims from irresponsible or reckless drivers.

A financial responsibility law requires motorists to furnish proof of financial responsibility up to certain minimum dollar limits

Proof is required:
After an accident involving bodily injury or property damage over a certain amount
Upon failure to pay a final judgment resulting from an auto accident
Following a conviction for certain offenses, such as DUI

The 2005 Personal Auto Policy (PAP) is widely used throughout the US
Drafted by the ISO, it replaces the 1998 form
Eligible vehicles include:
A four-wheeled motor vehicle owned or leased by the insured for at least six consecutive months
A pick-up or van with a gross vehicle weight rating of 10,000 pounds or less
Cannot be used for deliveries, with some exceptions

  • Six Basic Parts of PAP:

A. Liability Coverage

1. Insuring agreement – damages, & defense; single or split limits
2. Covered autos – auto, newly acquired, trailers, temporary substitute
3. Insured persons- named insured & family, and permission
4. Supplementary payments- bail bonds $250, interest on judgment, loss of earnings up to $200/day to attend hearing
5. Exclusions: intentional injury; property owned or transported, other items listed (see other Parts)
6. Out of state coverage – auto adjustment to comply with another state – “No Fault” laws
7. Other insurance- Pro rata share

B. Medical Payments Coverage

Reasonable medical & funeral expenses within 3 years of accident
Insured persons while in motor vehicle or as pedestrian
Exclusions: less than 4 wheels; public or livery conveyance; residence; workers comp; regular use; racing;

C. Uninsured Motorist

Insuring agreement, Insured person, Uninsured vehicles, other insurance; Underinsured Motorist (UM)
Exclusions: settling claim without insurer’s consent; punitive damages; and other above exclusions.

D. Coverage for Damage to your Auto (Part D)

Collision
Other than Collision
Transportation expense -$20/day up to $600 max temp sub.
Insuring agreement, covered vehicles (new 14 days); transportation expenses; limit of liability; other sources of recovery.
Exclusions: wear & tear; livery; radioactive; war; electronic (not permanent); tapes, records, discs; government destruction or confiscation; trailer,camper body; auto without permission; radar detection equipment; custom equipment; non owned used for business; racing; rental car if agreement or state law precludes recovery from the insured.

Under the coverage for damage to your auto, the insurer agrees to pay for any direct and accidental loss to a covered auto or any nonowned auto
Two optional coverages are available:
Collision coverage: a collision is defined as the upset of your covered auto or nonowned auto or its impact with another vehicle or object
Other-than-collision coverage: an other-than-collision loss is a loss due to the following perils:
Missiles or falling objects - Hail, water, flood
Fire - Riot or civil commotion
Malicious mischief or vandalism - Contact with a bird or animal
Theft - Glass breakage
Explosion or earthquake - Windstorm

E. Duties after an Accident or Loss

Notify insurer promptly
Cooperate with insurer for investigation & defense
If sued, you must immediately forward copies of legal papers
You must release medical information to evaluate injury and submit to physical exam if requested.
UM notification if hit&run driver is involved. If you sue the other driver, you must send copy to insurer.
You must take reasonable steps to prevent further damage
Carry a fill in the blank accident report form and a camera.

F. General Provisions

Policy period & territory- USA, Territories & Possessions – Puerto Rico & Canada
Termination – insured may cancel any time. Insurer may cancel: 10 day Notice – policy less than 60 days; 20 day Notice – 60+ days, premium not paid; drivers license suspended or revoked; misrepresentation; non renewal.
JUA –Joint underwriting Association (high risk auto)
High Risk Drivers – “Assigned Risk” plan
No Fault – Pure (cannot sue), Modified ($ threshold), Add On, Choice (lower premium).
Unsatisfied Judgment – 5 (MD, MI, NJ, NY, ND)
Uninsured required in some states
“No Pay, No Play” – uninsured cannot sue negligent driver.
Low cost minimum insurance

Major Rating Factors:
Territory
Age, gender, martial status
Use of Auto
Driver Education
Good Student Discount, & other discounts
Number & type of cars
Individual driving record
Credit score based on applicants credit record
Checklist for evaluating & comparing PAP….

  • Checklist:

What are the limits? For each policy Part (A-D)
Adequate limits?
Part D deductible?
Are low valued vehicles unnecessarily covered
Annual or semi annual premium
Automatic endorsements or optional by insurer

Endorsements:
Extended non-owned coverage; joint ownership
Motorcycles; Motor homes; Dune buggies; Golf Carts; misc. type vehicles
Underinsured
Limited Mexico coverage
Antique or restored vehicles; Customized equipment
Audio, visual and data equipment and media
Awnings, cabanas etc…
Auto loan/lease coverage
Towing and labor costs

Other Coverages
Mobile Home endorsement (10’ x 40’ min)
Inland Marine Floater (property frequently moved)
Personal Articles Floater (PAF) – separate or endorsement (items in excess of HO limits)
Boat owners package policy – all risks
Yacht Insurance – all risks
National Flood Insurance program
Fair Plans (Fair Access to Insurance Requirements)
Title Insurance
Umbrella Insurance

Umbrella Liability Coverage:
Over primary policy for Auto and Homeowners
Basic minimum limits required $300,000 or $500,000
Self-Insured Retention (SIR)
More than Excess Liability Coverage
Covers some things excluded or limited in primary coverage
Mental injury/anguish, humiliation, discrimination, Slander, libel
Drop down provision – primary if underlying coverage is exhausted or reduced
Cost: $1 million = $200/yr. ; $2M = $275 ; $3M= $325


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