6.1 Personal Auto Policy Structure and Eligibility
Key Takeaways
- The ISO Personal Auto Policy (PP 00 01) has six parts: A Liability, B Medical Payments, C Uninsured Motorists, D Damage to Your Auto, E Duties After a Loss, and F General Provisions
- "You" means the named insured plus a resident spouse; a "family member" is a resident relative by blood, marriage, or adoption
- Eligible vehicles are private-passenger autos and pickups/vans with a GVWR of 10,000 pounds or less not used to haul goods for a fee
- A newly acquired auto is covered automatically but must be reported within 14 days (4 days for physical damage if no vehicle currently carries it)
- Auto liability is mandatory in 49 states; New Hampshire is the only exception, and the Declarations control which coverages actually apply
The Personal Auto Policy at a Glance
The Personal Auto Policy (PAP) is the standard contract for insuring individually owned private-passenger vehicles. The most heavily tested edition is the Insurance Services Office (ISO) form PP 00 01 (current 2018 edition). The PAP is written in simplified, reader-friendly language, but it relies on a handful of defined terms that decide almost every coverage question on the exam. Master the definitions first; the coverage parts follow logically from them.
Two defined terms dominate. "You" and "your" mean 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 is a resident of the same household, including a ward or foster child.
The Six Parts of the PAP
The PAP is organized into six parts. Four are coverage parts and two are administrative.
| Part | Name | Function |
|---|---|---|
| Part A | Liability Coverage | Pays third parties for bodily injury and property damage the insured is legally liable for (third-party) |
| Part B | Medical Payments | Pays the insured's and passengers' medical bills regardless of fault (first-party) |
| Part C | Uninsured Motorists | Pays the insured's injuries when the at-fault driver has no or too little coverage (first-party) |
| Part D | Coverage for Damage to Your Auto | Collision and Other Than Collision on the insured's own vehicle (first-party) |
| Part E | Duties After an Accident or Loss | Insured obligations: prompt notice, cooperation, proof of loss |
| Part F | General Provisions | Policy-wide rules: territory, termination, legal action, subrogation |
A quick memory aid for the coverage parts is L-M-U-P: Liability, Medical, Uninsured motorists, Physical damage. Parts E and F are the administrative bookends that apply across all four coverages.
Who Is an "Insured"
Whether a person is an insured depends on which vehicle is being driven. The named insured and family members carry their coverage with them into other cars; an outside permissive user is covered only inside the named insured's vehicle.
| 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 the insured's car (a permissive user) is an insured only while in the covered auto. The named insured and family members stay insured even when driving someone else's car.
A divorced spouse who moves out loses "you" status once no longer a resident. A child who establishes a separate household stops being a "family member," but a college student temporarily away from home generally remains a resident and stays covered.
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 the named insured owns.
- 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 plus pickups and vans with a Gross Vehicle Weight Rating (GVWR) of 10,000 pounds or less that are not used to deliver or transport goods or materials (except farming or ranching, or as a temporary substitute while the covered auto is out of service).
Newly Acquired Auto — the Reporting Rule
| Situation | Liability / Medical / UM | Physical Damage (Coll & OTC) |
|---|---|---|
| Policy already covers another 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 insured must request it within 4 days |
Common error corrected: the window is 14 days (or 4 days for physical damage when no vehicle currently carries it) — not "14 to 30 days."
Mandatory Insurance, Declarations, and Other Insurance
Auto liability insurance is mandatory in 49 states; New Hampshire is the lone exception, though a NH driver must still prove financial responsibility after an at-fault accident. Penalties for driving uninsured include fines, registration and license suspension, impoundment, and a state filing such as an SR-22 certificate of financial responsibility.
The Declarations page personalizes the PAP: named insured and address, policy period, each covered auto by year/make/model and VIN, the coverages and limits purchased, Part D deductibles, premium, lienholder, and endorsements. The Declarations control whether a coverage applies at all — an insured with no Part D shown has no Collision or Other Than Collision, no matter how the loss occurred.
When more than one policy could apply, the PAP's Other Insurance rule in Part F controls: the policy is primary for a covered auto and excess over other collectible insurance when the insured drives a non-owned auto.
Under the PAP, how long does an insured have to report a newly acquired auto when the policy already covers another vehicle that carries physical damage coverage?
A neighbor borrows the named insured's covered auto with permission, then later drives his OWN car and causes an accident. When is the neighbor an "insured" under the named insured's PAP?