Automobile Policy, Personal

Definition

A personal automobile policy (PAP) is a type of auto insurance designed to provide broad coverage for car-related risks. This policy replaced the earlier Family Automobile Policy (FAP) and includes nine basis coverages:

Coverage A: Liability
Protects against legal liability due to injuries or damages caused to others while operating the insured vehicle.
Coverage B: Medical Payments
Covers medical expenses for the policyholder and passengers following a car accident.
Coverage C: Uninsured Motorist Coverage
Provides compensation if you are involved in an accident with an uninsured or hit-and-run driver.
Coverage D: Comprehensive
Reimburses for damages to your vehicle caused by events other than a collision, such as theft, fire, or natural disasters.
Coverage E: Collision
Covers repair or replacement costs if your car is damaged in an accident, regardless of fault.
Coverage F: Car Rental Expense (optional)
Pays for a rental car while your vehicle is being repaired after a covered accident.
Coverage G: Death, Dismemberment, and Loss of Sight (optional)
Provides benefits if the policyholder or passengers suffer grave injuries resulting in death, dismemberment, or loss of sight.
Coverage H: Total Disability (optional)
Offers compensation if the policyholder becomes totally disabled as a result of an injury sustained in an auto accident.
Coverage I: Loss of Earnings (optional)
Reimburses the policyholder for lost wages if they are unable to work due to injuries from an auto accident.

Examples

Jane’s Car Accident
Jane’s personal automobile policy includes Liability and Medical Payments coverages. When she accidentally hit another car at an intersection, her Liability coverage took care of the other driver’s damages and injuries.
Hail Damage Reimbursement
Tom’s car was damaged by a severe hailstorm. His Comprehensive coverage reimbursed him for the repair costs even though the damages did not result from a collision.
Uninsured Driver Incident
Samantha was hit by a driver who fled the scene. Her Uninsured Motorist Coverage compensated her for the damages to her car and medical expenses since the responsible party was never found.

Frequently Asked Questions (FAQs)

What is the basic difference between Collision and Comprehensive coverages?

Collision coverage pays for damages to your car resulting from a collision with another vehicle or object, while Comprehensive coverage covers non-collision-related damages such as theft or natural disaster.

Is Uninsured Motorist Coverage mandatory?

It depends on your state laws. Some states require this coverage, whereas others may not, but it is highly recommended for financial protection against uninsured or underinsured drivers.

Can I choose which coverages to include in my policy?

Yes, while Liability coverage is often mandatory, other coverages like Car Rental Expense, Death and Dismemberment, Total Disability, and Loss of Earnings are optional.

Will my insurance cover medical expenses if I’m at fault in an accident?

Yes, Medical Payments coverage will pay for medical expenses for you and your passengers regardless of who is at fault.

Is there a limit to how much my insurance will pay for a claim?

Yes, each coverage has its own limits as specified in the policy. It’s essential to review these limits to ensure they meet your needs.

Deductible: The amount the policyholder must pay out of pocket before insurance coverage kicks in.
Premium: The amount paid periodically to the insurance company for the auto insurance policy.
Policyholder: The individual who owns the insurance policy and is protected by its coverages.

Online References

Suggested Books for Further Studies

“Auto Insurance Basics: What Every Consumer Needs to Know” by David Sutton
“The Complete Car Insurance Guide: Understanding Your Options” by Robert Thomson
“Automobile Insurance and Claims: A Practical Guide” by Daniel Stern

Fundamentals of Personal Automobile Policy: Insurance Basics Quiz

### Which of the following coverages is Compulsory in most Automobile Policies? - [x] Liability Coverage - [ ] Car Rental Expense Coverage - [ ] Total Disability Coverage - [ ] Loss of Earnings Coverage > **Explanation:** Liability coverage is often compulsory by law in many regions as it covers the policyholder's legal responsibility to others for bodily injury or property damage. ### What does Comprehensive Coverage Protect Against? - [ ] Only collisions with other vehicles - [x] Non-collision events like theft, fire, and natural disasters - [ ] Legal defense costs in a lawsuit - [ ] Medical payments for passengers > **Explanation:** Comprehensive coverage protects against damage to your vehicle caused by non-collision events such as theft, fire, or natural disasters. ### Does Medical Payments Coverage Apply Regardless of Fault in an Accident? - [x] Yes, it applies regardless of fault. - [ ] No, it only applies if you are not at fault. - [ ] It depends on the severity of the accident. - [ ] It only applies to uninsured drivers. > **Explanation:** Medical Payments coverage pays for medical expenses for the policyholder and passengers regardless of who is at fault in an accident. ### What is the Primary Role of Uninsured Motorist Coverage? - [ ] To cover legal fees in case of a lawsuit - [x] To compensate for damages caused by an uninsured or hit-and-run driver - [ ] To pay for rental car expenses - [ ] To provide insurance discounts > **Explanation:** Uninsured Motorist Coverage compensates the policyholder for damages and injuries caused by an uninsured or hit-and-run driver. ### Can Collision Coverage be Applied to Damages from Non-Collision Events? - [ ] Yes, it covers all car-related damages. - [x] No, it only covers collisions with other vehicles or objects. - [ ] Only in case of natural disasters - [ ] If the car is completely totaled > **Explanation:** Collision coverage is specifically for damages resulting from collisions with other vehicles or stationery objects, not from non-collision events. ### Which Coverage is Optional and Compensates for Rented Car Costs While Your Vehicle is Being Repaired? - [ ] Liability Coverage - [ ] Medical Payments Coverage - [x] Car Rental Expense Coverage - [ ] Total Disability Coverage > **Explanation:** Car Rental Expense Coverage is optional and compensates for the costs of a rental car while your vehicle is being repaired. ### What Coverage Provides Benefits if the Driver Suffers Grave Injuries like Death? - [x] Death, Dismemberment, and Loss of Sight Coverage - [ ] Uninsured Motorist Coverage - [ ] Collision Coverage - [ ] Medical Payments Coverage > **Explanation:** Death, Dismemberment, and Loss of Sight Coverage provides benefits if the driver or passengers suffer severe injuries including death. ### Is Loss of Earnings Coverage Typically Included in Basic Automobile Policies? - [ ] Yes, it is always included. - [ ] No, it is never included. - [x] It is optional and can be added to the policy. - [ ] It is only included for commercial vehicles. > **Explanation:** Loss of Earnings Coverage is optional and can be included in the personal automobile policy to compensate for lost wages due to injuries from an auto accident. ### What does Total Disability Coverage Provide? - [ ] Only medical payments for minor injuries - [ ] Legal defense costs in a lawsuit - [x] Financial compensation if the policyholder becomes totally disabled - [ ] Discounts on future premiums > **Explanation:** Total Disability Coverage provides financial compensation if the policyholder becomes totally disabled due to injuries sustained in an auto accident. ### Can a policyholder choose not to include Collision Coverage in their Policy? - [x] Yes, Collision Coverage is optional in many policies. - [ ] No, it is mandatory for all policies. - [ ] Only if they have a high deductible. - [ ] Only if they have liability coverage. > **Explanation:** Collision Coverage is optional and policyholders can choose not to include it, though it is beneficial for covering vehicle repair costs after an accident.

Thank you for exploring the details of personal automobile policies and testing your understanding through our quiz. Continue enhancing your insurance knowledge!