6.1 Personal Auto Policy Structure and Eligibility
Key Takeaways
- The ISO Personal Auto Policy, form PP 00 01 (edition 09 18 is the current revision), 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 or vans with a GVWR of 10,000 lbs or less not used to deliver goods for a fee.
- A newly acquired auto is automatically covered but must be reported within 14 days; physical damage on a policy carrying no other physical-damage auto must be requested within 4 days.
- Auto liability is compulsory in 49 states; New Hampshire is the lone exception, and roughly 14 percent of drivers nationally are uninsured.
The Personal Auto Policy at a Glance
The Personal Auto Policy (PAP) is the contract used to insure individually owned private passenger vehicles. The most heavily tested version is the Insurance Services Office (ISO) form PP 00 01, with the 09 18 edition in widest current use. The PAP is written in simplified, agreement-style language and relies on defined terms that drive nearly every coverage question on the licensing exam.
Two defined terms matter most. "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 same household, including a ward or foster child. The named insured's protection is broadest; a family member's is nearly as broad; everyone else is covered only in narrow situations.
The Six Parts of the PAP
| Part | Name | What It Does |
|---|---|---|
| A | Liability Coverage | Pays third parties for bodily injury and property damage the insured is legally liable for |
| B | Medical Payments | First-party medical bills for the insured and passengers, regardless of fault |
| C | Uninsured Motorists | Pays the insured's injuries when the at-fault driver has no or too little insurance |
| D | Coverage for Damage to Your Auto | Collision and Other Than Collision on the insured's own vehicle |
| E | Duties After an Accident or Loss | Notice, cooperation, proof of loss, and other insured obligations |
| F | General Provisions | Territory, termination, legal action, subrogation, and policy-wide rules |
A reliable mnemonic for the coverage parts is LMUP: Liability, Medical, Uninsured motorists, Physical damage, followed by administrative parts E and F.
Who Is an "Insured"
Whether a person is an insured turns on which vehicle is being driven.
| Driver | Your covered auto | Other (non-owned) auto |
|---|---|---|
| Named insured ("you") | Insured | Insured |
| Resident spouse | Insured | Insured |
| Resident family member | Insured | Insured |
| Permissive user (a friend) | Insured | NOT insured |
Key trap: A permissive user is an insured only while in your covered auto. The named insured and family members carry coverage with them into other people's cars; an outside permissive user does not.
A divorced spouse who moves out loses "you" status because residency ends. A child who establishes a separate household stops being a "family member," but a college student only temporarily away from home remains a household resident and stays covered.
What Counts as "Your Covered Auto"
The definition 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 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 lbs or less that are not used to deliver or transport goods for a fee.
Newly Acquired Auto Reporting Rule
| Situation | Liability / Medical / UM | Physical Damage |
|---|---|---|
| Policy already covers another auto with physical damage | Automatic; report within 14 days | Automatic; report within 14 days |
| Policy carries NO physical-damage auto | Automatic; report within 14 days | Automatic only if requested within 4 days |
Common error corrected: the window is 14 days (or 4 days for physical damage when no vehicle on the policy carries it). It is not "30 days."
Mandatory Insurance and the Market
Auto liability is compulsory in 49 states; New Hampshire is the sole state that does not mandate it, though a NH driver must still prove financial responsibility after an at-fault loss. About 14 percent of U.S. drivers are uninsured (Insurance Research Council), and penalties for driving uninsured include fines, registration and license suspension, impoundment, and a state filing such as an SR-22 certificate of financial responsibility.
Trailers and Temporary Substitutes
An owned trailer is automatically part of "your covered auto" for liability, but physical damage on a trailer generally requires it to be scheduled on the Declarations. A temporary substitute vehicle, such as a loaner used while a covered auto is being repaired, inherits the same coverage the disabled covered auto carried. The substitute must be a non-owned vehicle used because the covered auto is temporarily out of normal use; a vehicle furnished for the insured's regular use does not qualify.
Why Defined Terms Decide the Question
Nearly every PAP claim question is 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 coverage into other cars while outside permissive users are covered only in the covered auto, a single fact, who was driving what, usually changes the answer. Identify the driver's status before reaching for a coverage part.
The Declarations Page
The Declarations personalize 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. When a question asks whether a coverage applies, the Declarations control whether the insured actually bought it. An insured with no Part D shown has no Collision or Other Than Collision at all, regardless of how the loss occurred.
Under the PAP definition of "your covered auto," how long does an insured have to report a newly acquired vehicle when the policy already covers another auto with physical damage coverage?
Brian, the named insured, lends his covered auto to his neighbor Dana. Separately, Brian borrows his coworker's car for the weekend. Which statement is correct under the PAP?