6.1 Personal Auto Policy Structure and Eligibility
Key Takeaways
- The ISO Personal Auto Policy (form PP 00 01, 2018 edition) has six parts: A Liability, B Medical Payments, C Uninsured Motorists, D Damage to Your Auto, E Duties After Loss, and F General Provisions.
- "You" means the named insured plus a resident spouse; a "family member" is a household resident related by blood, marriage, or adoption, including a ward or foster child.
- Eligible vehicles are private passenger autos and pickups/vans rated 10,000 pounds GVWR or less not used to deliver goods for a fee.
- A newly acquired auto is covered automatically but must be reported within 14 days; physical damage on a brand-new policy with no prior physical-damage auto must be requested within 4 days.
- Auto liability is mandatory in 49 states; New Hampshire alone does not require it, and about 14% of U.S. drivers are uninsured (Insurance Research Council, 2023).
The Personal Auto Policy at a Glance
The Personal Auto Policy (PAP) is the contract that insures individually owned private passenger vehicles. The most heavily tested version is the Insurance Services Office (ISO) form PP 00 01 (2018 edition). It is written in simplified, plain-English language and uses a small set of defined terms that drive nearly every coverage answer on the exam.
Two terms control most questions. "You" means the named insured shown on the Declarations and that person's resident spouse. A "family member" is a person related to the named insured by blood, marriage, or adoption who lives in the household, including a ward or foster child.
The Six Parts of the PAP
| Part | Name | Function |
|---|---|---|
| A | Liability Coverage | Pays third parties for bodily injury and property damage you are legally liable for |
| B | Medical Payments | Pays your and passengers' medical bills regardless of fault (first-party) |
| C | Uninsured Motorists | Pays your injuries when the other driver has no or too little insurance |
| D | Coverage for Damage to Your Auto | Collision and Other Than Collision on your own vehicle (first-party) |
| E | Duties After an Accident or Loss | The insured's obligations: prompt notice, cooperation, proof of loss |
| F | General Provisions | Policy-wide rules: territory, termination, legal action, subrogation |
A quick mnemonic for the four coverage parts is LMUP — Liability, Medical, Uninsured motorists, Physical damage — followed by the two administrative parts, E and F.
Who Is an "Insured"
Who qualifies as an insured depends on which vehicle is being driven. The named insured and family members carry their coverage with them into other people's cars; an outside permissive user does not.
| Driver | Your covered auto | Other (non-owned) auto |
|---|---|---|
| Named insured ("you") | Insured | Insured |
| Resident spouse | Insured | Insured |
| Resident family member | Insured | Insured |
| Other person using your auto with permission | Insured | NOT insured |
Key trap: A friend who borrows your car is an insured only while in your covered auto. The named insured and family members keep coverage even in a borrowed or rented vehicle; an outside permissive user does not.
A divorced spouse who moves out is no longer a resident and loses "you" status. A child who establishes a separate household stops being a "family member." A college student who is only temporarily away — still a household resident — generally remains a covered family member.
What Counts as "Your Covered Auto"
The definition of "your covered auto" has four buckets:
- Any vehicle shown in the Declarations.
- A newly acquired auto (additional or replacement).
- Any trailer you own.
- A temporary substitute — a non-owned vehicle used while a covered auto is out of normal use for breakdown, repair, servicing, loss, or destruction.
Eligible vehicles are private passenger autos and pickups or vans with a Gross Vehicle Weight Rating (GVWR) of 10,000 pounds or less that are not used to deliver or transport goods for a fee.
Karen, the named insured, borrows her neighbor's car while her own insured auto is in the shop for a transmission repair. The borrowed car is a temporary substitute. While driving it she is at fault for an accident. Under her PAP, which coverage applies to the bodily injury she causes?
Newly Acquired Auto — the Reporting Rule
A newly acquired auto is covered automatically, but the reporting window is exam gold.
| Situation | Liability / Medical / UM | Physical Damage (Collision & OTC) |
|---|---|---|
| Policy already covers at least one auto with physical damage | Automatic; report within 14 days | Automatic; report within 14 days |
| Policy has NO auto carrying physical damage | Automatic; report within 14 days | Automatic, but you must request it within 4 days |
Correction to a common error: the window is 14 days (or 4 days for physical damage when no current vehicle carries it). It is not "14 to 30 days."
Mandatory Insurance and the Market
Auto liability insurance is mandatory in 49 states; New Hampshire alone does not require it, though a New Hampshire driver must still prove financial responsibility after an at-fault accident. About 14% of U.S. drivers are uninsured (Insurance Research Council, 2023). Penalties for driving uninsured include fines, registration and license suspension, vehicle impoundment, and a state filing such as an SR-22 certificate of financial responsibility.
The Declarations Page
The Declarations page personalizes the PAP. It lists the named insured and address, the policy period, each covered auto by year/make/model and vehicle identification number, the coverages purchased and their limits, the Part D deductibles, the premium, any lienholder or lessor, and the attached endorsements.
When a question asks whether a coverage applies, the Declarations control whether the insured actually purchased it. An insured with no Part D shown has no Collision or Other Than Collision — a fact pattern the exam uses to bait test-takers into paying for the insured's own vehicle damage that was never insured.
Why the Defined Terms Decide the Question
Nearly every PAP claim question can be solved by answering two questions in order: (1) Is the person an insured for this situation? and (2) Is the vehicle a covered auto or a permitted non-owned auto? Because the named insured and family members carry their coverage into other people's cars, while outside permissive users are covered only inside the covered auto, a single fact — who was driving what — usually changes the answer.
On June 1, an insured whose PAP already covers two autos (both carrying Collision and Other Than Collision) buys a third vehicle to add to the policy. He garages it but does not call his agent. The new auto is damaged in a covered collision on June 12. How does the PAP respond?