6.1 Personal Auto Policy Structure and Eligibility

The Personal Auto Policy at a Glance

The Personal Auto Policy (PAP) is the standard contract used to insure individually owned private passenger vehicles. The version tested on the national portion of every state P&C exam is the Insurance Services Office (ISO) form PP 00 01 (current 09 18 edition). It is drafted in simplified, plain-English language and relies on a handful of defined terms that drive nearly every coverage question.

Two defined terms matter most. "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.

Memorize the hierarchy: the named insured's protection is the broadest, a family member's is nearly as broad, and everyone else is an insured only in narrow circumstances. A spouse who stops living in the household keeps "you" status for 90 days or until the policy period ends, whichever comes first. This 90-day rule prevents an abrupt coverage gap during a separation.

The PAP is a named-insured contract, not a vehicle-by-vehicle contract for liability purposes. That is why "you" and "family member" follow the person into any auto, while coverage for guests, employers, and permissive users is tied to the specific covered auto. Exam questions exploit this by describing the insured driving a non-owned car (covered, because the person is covered in any auto) versus a friend driving the insured's car (covered as a permissive user) versus a friend driving the friend's own car (not covered under the insured's policy at all).

The Six Parts of the PAP

A tested mnemonic for the coverage parts is LMUP - Liability, Medical payments, Uninsured motorists, Physical damage - followed by the administrative Parts E and F.

Eligible Vehicles and the "Your Covered Auto" Definition

The PAP insures four categories of "your covered auto":

• Any vehicle shown on the Declarations.
• A newly acquired auto (additional or replacement).
• A trailer the insured owns.
• A temporary substitute vehicle used while a covered auto is out of service for repair, servicing, breakdown, loss, or destruction.

To be eligible, a vehicle must be a private passenger auto, or a pickup or van with a Gross Vehicle Weight Rating (GVWR) of 10,000 pounds or less that is not used to deliver or transport goods (incidental delivery and farming/ranching use are permitted). Vehicles owned by a partnership or corporation, or those with more than four wheels, generally require a commercial auto policy instead.

Newly Acquired Autos - The Reporting Trap

A newly acquired auto gets automatic coverage, but the reporting window is heavily tested:

• Liability, Medical Payments, and UM (Parts A, B, C): coverage is automatic; the insured must ask to add the car within 14 days.
• Physical damage (Part D): if no other auto on the policy already carries collision/OTC, the new car has only 4 days of automatic Part D before the insured must request it.
• A replacement auto gets the same coverage as the car it replaces; an additional auto gets the broadest coverage on any vehicle already on the policy.

Trap: a candidate who memorizes only "14 days" misses that physical damage on a first financed car must be requested within 4 days to be covered for a loss.

Who Is an Insured Under the PAP

The identity of the insured changes by part, but the recurring pattern for liability is:

1. You and any family member for the ownership, maintenance, or use of any auto or trailer.
2. Any person using your covered auto with permission.
3. Any person or organization legally responsible for acts of an insured while using a covered auto (vicarious liability), such as an employer for a permissive employee driver.

This layered definition explains why a friend who borrows the insured's car with permission is covered, while the insured driving a friend's car is covered only because "you" and "family member" extend to any auto.

The vicarious-liability extension is commercially significant: when an insured runs a personal errand for an employer and causes an accident, the employer can be dragged into the suit, and the insured's PAP will defend and indemnify that employer up to the limit. The PAP, however, does not extend to the employer's own fleet operations - that is a commercial auto exposure.