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Overview of Automobile Coverages. 1. Automobile liability coverage 2. Medical payments coverage 3. Physical damage coverage, comprehensive and collision 4. Uninsured motorists coverage. General Nature of Personal Auto Policy. 1. Designed to cover three types of loss: legal liability

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overview of automobile coverages
Overview of Automobile Coverages
  • 1. Automobile liability coverage
  • 2. Medical payments coverage
  • 3. Physical damage coverage, comprehensive and collision
  • 4. Uninsured motorists coverage
general nature of personal auto policy
General Nature of Personal Auto Policy
  • 1. Designed to cover three types of loss:
    • legal liability
    • injury to insured or family members
    • damage to the auto itself
  • 2. Subject to limitations, the policy covers:
    • others while driving the insured auto
    • the named insured and family while driving other autos
personal auto policy eligibility
Personal Auto Policy Eligibility
  • 1. Auto owned by individual or husband & wife
  • 2. Private passenger automobile
  • 3. Pickup, van, or panel truck that
    • has a GVW of less than 10,000 lbs.
    • is not used for delivery or transportation of goods unless
      • incidental to business of installing or repairing furnishings or equipment
      • for farming or ranching
pap policy format
PAP Policy Format
  • Part A Liability
  • Part B Medical payments
  • Part C Uninsured motorist coverage
  • Part D Coverage for damage to your auto
  • Part E Duties after an accident or loss
  • Part F General provisions
pap liability insuring agreement
PAP Liability Insuring Agreement
  • 1. Insurer promises to pay damages for “bodily injury” or “property damage” for which any “insured” becomes legally responsible because of an auto accident.
    • 2000 edition of the PAP is written with split liability limits (e.g., 20/40/15).
  • 2. Key elements in determining coverage, then, are whether the individual is an “insured,” and whether the auto being operated is a covered auto.
insured as used in this part means
“Insured” as used in this part means:
  • 1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer.”
  • 2. Any person using “your covered auto.”
  • 3. For “your covered auto,” any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.
insured as used in this part means7
“Insured” as used in this part means:
  • 4. For any auto or “trailer,” other than “your covered auto,” any person or organization but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this part. This provision (B.4.) applies only if the person or organization does not own or hire the auto or “trailer.”
j your covered auto means
J. “Your covered auto” means:
    • 1. Any vehicle shown in the Declarations.
    • 2. A “newly acquired auto”.
    • 3. Any “trailer” you own.
    • 4. Any auto or “trailer” you do not own while uses as a temporary substitute for any other vehicle described in this definition which is out of normal use because of its:

a. Breakdown; b. Repair

c. Servicing; d. Loss; or

e. Destruction.

  • This provision (J.4.) does not apply to Coverage for Damage to Your Auto.
newly acquired auto
Newly Acquired Auto
  • Inclusion of a “newly acquired auto” in “Your Covered Auto” provides coverage for new autos, but on a qualified basis.
    • 1. auto must meet PAP eligibility requirements
      • private passenger auto or
      • a pickup or van that does not exceed the gross vehicle weight limitation and
      • not used for delivery or transportation of goods except as allowed by the eligibility requirements).
    • 2. Separate provisions apply for coverages other than physical damage and for the physical damage coverages.
newly acquired auto10
Newly Acquired Auto
  • 3. For liability, medical payments, and uninsured motorists coverages, replacement autos are automatically covered for the remainder of the policy period, without notice to the insurer.
  • 4. For additional vehicles, the insurer must be notified and coverage must be requested within 14 days of the date of acquisition for these coverages.
newly acquired autos physical damage
Newly Acquired Autos - Physical Damage
  • Replacement and additional vehicles are automatically covered for 14 days, for whatever physical damage coverage is already provided for at least one insured auto.
    • 1. New auto has the broadest physical damage coverage provided by the policy.
    • 2. If policy does not include physical damage coverage on any autos, newly acquired autos are automatically covered for 4 days.
      • $500 deductible.
      • If coverage is not requested within grace period, coverage begins when requested.
pap liability exclusions
PAP Liability Exclusions
  • A.1. intentional injury or damage
  • A.2. to property owned or being transported
  • A.3. care, custody and control
  • A.4. injury to employees
  • A.5. while used as a public or livery conveyance
  • A.6. non-family members employed in auto business
  • A.7. business use of trucks
  • A.8. being used without reasonable belief of permission
  • A.9. nuclear exclusion
supplementary payments
Supplementary Payments
  • 1. Cost of bail bonds required because of an accident covered under the policy, up to $250
  • 2. Premiums on appeal bonds to release attachments in suits covered under the policy
  • 3. Interest on judgments after judgment is entered
  • 4. Loss of earnings up to $200 a day while attending trials at company’s request
  • 5. Other reasonable expenses incurred at the request of the insurer
pap medical payments coverage
PAP Medical Payments Coverage
  • Medical payments insuring agreement agrees to pay medical expenses for
    • 1. Insured and family if injured while “occupying or struck by”
    • 2. Others: while “occupying”
limitations on medical payment recoveries
Limitations on Medical Payment Recoveries
  • 1. Medical payments reduced by liability and UM payments.
  • 2. Recipient agrees to apply payment against judgment.
  • 3. Excess over nonowned auto.
  • 4. Subject to subrogation.
uninsured motorists coverage
Uninsured Motorists Coverage
  • 1. Pays what an uninsured driver’s insurance company would have paid if he or she had insurance.
  • 2. Uninsured motorist defined
    • no insurance
    • hit-and run
    • insurer becomes insolvent
underinsured motorists coverage
Underinsured Motorists Coverage
  • 1. Mutually exclusive with uninsured motorist
  • 2. Pays when other driver insured, but inadequately
physical damage insurance
Physical Damage Insurance
  • 1. Loss other than by collision-basically open-peril excluding collision
  • 2. Loss by collision
  • 3. Physical damage: nonowned autos
    • private passenger, pickup or vans
    • not owned by or furnished for regular use of named insured or family member
    • includes temporary substitute auto
physical damage exclusions
Physical Damage Exclusions
  • 3 exclusions apply to nonowned autos.
    • nonowned auto used without reasonable belief of permission (7)
    • nonowned auto used in auto business (11)
    • loss to a rental vehicle if rental company is precluded from recovery by state law or rental agreement
physical damage exclusions20
Physical Damage Exclusions
  • 6 exclusions apply to specific property
    • sound systems unless permanent (4)
    • electronic equipment (5)
    • tapes, records, disks for (4) and (5) above
    • camper bodies, trailers, motor homes not listed in the policy (6)
    • fuzz-busters (10)
    • custom furnishings or equipment in pickup or van (11)
part e duties after an accident or loss
Part E: Duties After an Accident or Loss
  • 1. Give notice to insurer
  • 2. Cooperate with insurer
  • 3. Send notices of legal papers
  • 4. Submit to physical examination
  • 5. Authorize insurer to obtain records
  • 6. Submit proof of loss when required
  • 7. Notify police if a hit-and-run driver is involved
  • 8. Notify police if the car is stolen
named non owner policy
Named Non-Owner Policy
  • 1. Designed for persons who do not own an auto, but want “drive other car coverage”.
  • 2. Covers named insured only (even spouse not included).
  • 3. Coverage is excess over any insurance on the non-owned auto.
miscellaneous type vehicle endorsement
Miscellaneous Type Vehicle Endorsement
  • Used with PAP to provide coverage on certain recreational motor vehicles:
  • motor homes
  • motorcycles,
  • mopeds, motorscooters, motorbikes
  • go-carts
  • all-terrain vehicles
  • dune buggies
  • golf carts
  • antique autos
  • classic autos
automobile insurance rating plans
Automobile Insurance Rating Plans
  • Most automobile insurance rating systems begin with three basic factors
  • 1. Age and sex of the driver
  • 2. Use of the auto
  • 3. Driver’s record
automobile rating system operator classification
Automobile Rating SystemOperator Classification
  • Adult Classifications
  • 1. Principal operator age 75 or over
  • 2. Principal operator age 65 to 74
  • 3. Principal operator age 50 to 64
  • 4. Only operator female, age 30 to 49
  • 5. All other adult operators
automobile rating system operator classification26
Automobile Rating SystemOperator Classification
  • Youthful Operator Classifications
  • 6. Female under 25, not married, owner or principal operator
  • 7. Male under 25, married
  • 8. Female under 25, not married, not owner or principal operator
  • 9. Male under 25, not married, not owner or principal operator
  • 10. Male under 30, not married, but is owner or principal operator
automobile rating system use classification
Automobile Rating SystemUse classification
  • 1. Pleasure use
  • 2. To and from work less than 15 miles
  • 3. To and from work over 15 miles
  • 4. Business use
  • 5. Farm use
driver and use rating factors
Driver and Use Rating Factors
  • Pleasure Under Over BusinessFarmPrincipal Operator Use 15 mi. 15 mi. Use Use
  • Age 75 & Over 1.00 1.05 1.15 1.20 .85
  • Age 65 to 74 .85 .90 1.00 1.05 .70
  • Age 50 to 64 .80 .85 .95 1.00 .65
  • Female, age 30 to 49 1.00 1.05 1.15 1.20 .85
  • Other Adult Operator 1.00 1.05 1.15 1.20 .85
automobile rating system
Automobile Rating System
  • Youthful operator discounts
    • 1. Drivers training credit
    • 2. Good student discount
sample youthful driver rating factors
Sample: Youthful Driver Rating Factors
  • Pleasure or To Work or SchoolYouthful Operator Age Farm Useor Business Use
  • Unmarried F (Not O/PO) Under 21 2.10 2.25
  • Unmarried F (Not O/PO) 21 - 24 1.30 1.45
  • Unmarried F (O/PO) Under 21 2.60 2.75
  • Unmarried F (O/PO) 21 - 24 1.60 1.75
  • Unmarried M (Not O/PO)Under 21 2.50 2.65
  • Unmarried M (Not O/PO) 21 - 24 1.35 1.50
  • Unmarried M (O/PO)Under 213.30 3.45
  • Unmarried M (O/PO) 21 - 241.75 1.90
  • Married Male Under 211.55 1.70
  • Married Male 21 - 24 1.25 1.40
safe driver rating system
Safe Driver Rating System
  • Safe driver rating plan charges points for violations and accidents
    • 1. 40 point surcharge for 1 point
    • 2. 50 additional point surcharge for second point (+ 90 total)
    • 3. 60 additional point surcharge for third point (+150 total)
    • 70 additional point surcharge for fourth point (+220 total)
cost of increased liability limits
BI Limits Factor

$20,000/40,000 1.00

25,000/50,000 1.07

50,000/100,000 1.27

100,000/300,000 1.41

250,000/500,000 1.53

500,000/1,000,000 1.57

PD Limits Factor

$15,000 1.00

25,000 1.02

50,000 1.05

100,000 1.10

250,000 1.17

500,000 1.19

Cost of Increased Liability Limits
cost of increased limits
Cost of Increased Limits
  • Medical Payments
  • $1,000 limit = $11
  • 2,000 limit = 17
  • 5,000 limit = 30
pap deductible credits
PAP Deductible Credits
  • Comprehensive Collision Percent of Percent ofDeductible $100 Deductible $200 Deductible
    • None 118% ---
  • $50 109% ---
  • 100 100% 105%
  • 200 88% 100%
  • 250 83% 98%
  • 500 66% 89%
  • 1,000 49% 74%
auto liability insurance requirements
Auto Liability Insurance Requirements
  • 1. As late as 1971, only three states had compulsory auto liability insurance laws.
  • 2. Currently, 40 states and the District of Columbia have compulsory auto liability insurance laws.
  • 3. The remainder of the states have Financial Responsibility Laws.
financial responsibility laws
Financial Responsibility Laws
  • 1. Despite widespread enactment of compulsory auto insurance laws, most states retained financial responsibility laws.
  • 2. The laws require all parties involved in an accident causing bodily injury or property damage above a specified amount to show proof of financial responsibility.
  • 3. Sometimes called “free-bite” laws, because proof of financial responsibility is required only after an accident.
financial responsibility laws37
Financial Responsibility Laws
  • 4. Financial responsibility is proved by a certificate of insurance (SR-21) or by depositing cash or securities with the state.
  • 5. If proof cannot be provided, the individual’s license will be revoked until proof of future financial responsibility (SR-22) is provided.
insurance for high risk drivers
Insurance for High Risk Drivers
  • Drivers who cannot obtain auto liability insurance through normal market channels may obtain coverage from an assigned risk plan or alternate “shared market” mechanism:
    • automobile insurance (assigned risk) plan
    • reinsurance pool
    • joint underwriting association
    • Maryland State Auto Insurance Fund
criticisms of the tort system as it relates to automobiles
Criticisms of the Tort System as It Relates to Automobiles
  • 1. Many persons who are injured remain uncompensated.
  • 2. Amount of compensation depends on attorney’s skill.
  • 3. Traditional system is inequitable, overpaying and underpaying.
  • 4. Traditional system is too expensive.
no fault concept
No-Fault Concept
  • 1. Under the no-fault concept, no attempt is made to fix blame.
  • 2. Each party collects for injuries sustained from his or her own insurance company.
  • 3. Under a pure no-fault system, the right to sue would be abolished.
types of auto reform laws
Types of Auto Reform Laws
  • 1. Pure no-fault
  • 2. Modified no-fault
  • 3. Expanded first party
typical no fault benefits
Typical No-Fault Benefits
  • 1. Medical Expenses up to specified maximum.
  • 2. Loss wages up to specified dollar maximum.
  • 3. Loss of services (e.g., by homemaker) up to specified dollar maximum.
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