Chapter 18- AUto Insurance
split limits auto liability 100/300/50
$100,000 will reimbursed 1 person in 1 accident (bodily injury); $300,000 if multiple people are in the car, $50,000 property damage liability claims
Covered Auto
- PAP defines this as a vehicle specifically listed in the policy declarations, as well as newly acquired autos, trailers, and temporary substitute vehicles o Any vehicle that you required is automatically covered o You have responsibility to let company know when you have newly acquired auto
Newly acquired auto
- an auto acquired after the effective date of the policy. May be replacement or additional vehicle
Temporary substitute vehicle
- vehicle not owned by the insured while it is used temporarily in place of a covered auto that is not out of normal use because of breakdown, repair, servicing, loss, or destruction o Mostly recognized as rental car
type of endorsements for auto policies
1. Extended nonowned 2. named nonowners 3. Miscellaneous type of vehicles 4. Snowmobile 5. Joint ownership 6. Mexico coverage endorsement 7 Towing and Labor Costs 8. Trip interruption
Homeowners insurance is usually required by a (1), and auto liability insurance is invariably required by (2), as well as by the bank or finance company that helps finance the purchase or lease of an auto.
1. mortgagee 2. law
extended nonowned coverage endorsement
A Personal Auto Policy endorsement that extends liability coverage to named individuals for a nonowned automobile which is furnished for their regular use. If you live in a city and you don't own a car and take public transportation, but you might want to rep a zip car every now and then.
How can a client get liability coverage for his use of his motorcycle, dune buggy, and snowmobile?
A miscellaneous type vehicle endorsement is used to cover miscellaneous types of owned vehicles, including motorcycles and dune buggies. Each vehicle is listed in a schedule, and the same coverages that apply to autos in the PAP can be purchased. Likewise, a snowmobile endorsement can be used to insure snowmobiles
no-fault auto insurance
A system under which drivers must have coverage for their own protection. It also limits the damages for which an injured party can sue. Under this system, after an accident both parties would be covered by their own insurance policies. Only some states use this system.
Compulsory Insurance
Any form of insurance which is required by law. In many states, for example, automobile bodily injury liability insurance is compulsory for all owners of automobiles.
Betty frequently uses cars in connection with her business. Does her Personal Auto Policy provide liability coverage when she drives the company car furnished to her for her regular use?
Betty has liability coverage under her PAP only if she has added an endorsement to include liability coverage on this car.
What factors should clients consider when shopping for auto insurance?
Clients should evaluate the cost of coverage, the financial strength of the insurer, and the service from the company and its agents.
On a family vacation, you rent a car and turn down the loss damage waiver the rental company offers. Which coverage in your Personal Auto Policy would provide you with coverage for damage to the rental car (minus any deductible) when the rental car is damaged when you hit a phone pole while swerving to avoid another vehicle.
Coverage under Part D, Coverage for Damage to Your Auto, applies to nonowned vehicles that are rented on a temporary basis, such as when an insured is on a trip. Damage to the nonowned auto caused by the impact of that auto with an object is covered under Part D's collision coverage.
On a family vacation, you rent a car and turn down the loss damage waiver the rental company offers. Which coverage in your Personal Auto Policy would provide you with coverage for damage to the rental car (minus any deductible) when the rental car is scratched by vandals while it is parked in the hotel parking lot.
Damage to the nonowned auto caused by malicious mischief or vandalism is covered under Part D's other-than-collision coverage
(T/F) Subject to certain dollar limits, every PAP automatically covers transportation expenses, such as the costs of renting a car, while a covered auto is out of service because of a collision.
False. A PAP covers transportation expenses while a covered auto is out of service because of a collision only when the policy provides collision coverage on that covered auto.
(T/F) If Jim rented a car, damaged it, and was sued by the rental company, he would be covered under the liability coverage of his PAP for the property damage to the rental car.
False. If Jim rented a car, damaged it, and was sued by the rental company, he would be covered under the collision or other-than-collision coverages of his PAP for the property damage to the rental car. Liability coverage excludes damage to property rented to the insured.
(T/F) If Hank hits a deer, the damage to his car would be paid under the collision coverage of his PAP.
False. If a client hits a deer, the damage to his car would be paid under the other-than-collision coverage.
(T/F) Most states handle hard-to-insure drivers through joint underwriting associations.
False. Most states handle hard-to-insure drivers through automobile insurance plans.
How might auto coverage be obtained for clients who are hard-to-insure drivers?
Hard-to-insure drivers can usually find some coverage in the residual market, which consists of specialty insurers and state programs to make insurance available, though not necessarily affordable. State programs usually follow one of three models: auto insurance plans, joint underwriting associations, or reinsurance facilities. A small number of drivers with very poor driving records may still be unable to obtain insurance from any of these sources in some states.
the most common auto policy
ISO's personal auto policy, often referred to as the PAP
A client whose wife frequently gives rides to several other children attending their daughter's nursery school asks, "Is any coverage available under our Personal Auto Policy in case the children are injured in an accident that is not my wife's fault?"
Part B of the PAP provides payment for the reasonable and necessary medical expenses of an insured as a result of an auto accident. Benefits are paid regardless of fault. The insureds under Part B include the named insured, spouse, and any family members (1) while occupying either a motor vehicle designed for use on public roads or a trailer or (2) when struck as a pedestrian by such a vehicle or trailer. Any other person, such as a child being transported, who is injured while occupying a covered auto is also an insured. The answer to this question might be different in a state with a no-fault law
Suppose instead that Pete kept his old car, did not notify his insurer that he also had a new car, and the accident to his new car occurred when he returned it to the dealer for a 3,000 mile checkup two months after he bought it. What coverage, if any, does Pete have for this accident?
Pete would have no coverage for this additional car since he did not report it to his insurer within 14 days of the purchase
Betty frequently uses cars in connection with her business. Does her Personal Auto Policy provide liability coverage when she helps to drive her friend's car to a business meeting in another state?
The friend's policy is primary because it covers an "owned vehicle," and Betty's insurance is secondary or excess because she is driving a "nonowned vehicle." Betty's policy will pay only on an excess basis after the limits of the owner's policy are exhausted.
(T/F) A 25-year-old woman who lives with her parents is covered under her parents' PAP while she is driving the family car or a friend's car.
True
(T/F) If Jim has an accident while driving his friend's car and is sued for $250,000 for bodily injury and property damage, the friend's liability insurance would pay first and Jim's liability coverage would be excess and thus pay only if needed
True
(T/F) If you have PIP, you don't purchase medical payments coverage auto because its included within PIP
True
a no-fault type of auto insurance system that makes first-party benefits available but does not restrict the right to sue for damages
add-on plan
a state plan that assigns drivers who have been unable to obtain auto insurance to insurance companies in proportion to their volume of business in a state. Formerly called assigned risk.
automobile insurance plan
a modified no-fault law that allows an insurance applicant either to elect traditional tort coverage or to elect no-fault coverage at a reduced premium
choice no fault
the most common no-fault insurance
modified no fault insurance the right to sue the negligent party exists only if injuries exceed a dollar or verbal threshold
Bob's only vehicle is a company car. He has absolutely no protection of his own if he borrows or rents another vehicle. Carol lives in New York City where parking costs and public transportation make it impractical to own a car, but she frequently rents a car while on vacation or to make trips outside the city. The _______________ endorsement is for use by people like Bob and Carol, who do not own an auto but want to have protection when they drive _________ vehicles. Parts A, B, and C of the PAP are available
named nonowner coverage
a personal or business liability policy that provides high limits for a broad range of liability situations. The policyowner is required to have underlying liability coverage of specified amounts. Claims not covered by the underlying insurance are subject to a self-insured retention.
umbrella liability policy
an auto insurance coverage that enables an insured to collect from his or her own insurance company for bodily injury (and property damage in a few states) that is caused by a legally liable but underinsured driver. Covers the difference between the limit of the underinsured motorists coverage and the amount of the auto liability insurance carried by the underinsured driver.
underinsured motorists coverage
The PAP has a specific list of sources of loss that are considered other than collision. These are
• missiles and falling objects • fire • theft or larceny • explosion or earthquake • windstorm • hail, water, or flood • malicious mischief or vandalism • riot or civil commotion • contact with a bird or animal • breakage of glass. However, the policyowner may choose to consider this part of the collision loss if it is caused by collision.
Pete pays cash for a new car, and when he drives it off the dealer's lot, he hits another car driving along the street in front of the dealership. The accident is Pete's fault. He injures the driver of the other car and damages both his car and the other driver's car. Pete had $100,000 of liability coverage for bodily injury and property damage (Part A) and collision coverage (Part D) with a $250 deductible on the old car he just traded in as part of the purchase of his new car. What coverage, if any, does Pete have for this accident?
Pete would be covered up to a total of $100,000 for bodily injury to the other driver and property damage to the other driver's car. Pete's own car would be covered by the collision coverage subject to the $250 deductible as long as he notifies his company that he wants collision coverage on the new car within 14 days of purchase.
Auto Part D -What is covered? • Who are the insureds? • What exclusions apply? • What happens when other insurance also covers a claim?
There are actually two major coverages: (1) collision and (2) other than collision. "Other than collision" was formerly called "comprehensive," The term is no longer used in personal auto policies because of a concern that some consumers might assume anything referred to as "comprehensive" is all-encompassing and covers losses of all kinds Part D applies to both covered autos and nonowned autos. The term covered auto was previously defined and applies throughout the PAP. exclusions: losses to any vehicle are excluded if it was used as a public or livery conveyance or in a racing competition. Losses to nonowned autos are excluded when used without a reasonable belief that an insured is entitled to use them or when the vehicle is used by anyone in the business of selling, repairing, servicing, storing, or parking vehicles designed for use on public highways.
(T/F) If Ken has an umbrella policy with a $1 million limit and a $250 self-insured retention, and he is sued for $100,000 for an act covered under the umbrella policy but not under the required underlying coverages, the umbrella policy would pay all but $250 of the judgment.
True
(T/F) If a client has a $300,000 single limit of liability in his PAP, he would be fully covered if sued for $150,000 for bodily injury and $20,000 for property damage as a result of an auto accident that was his fault.
True
(T/F) In addition to covering bodily injury and property damage liability, a typical personal umbrella policy also covers personal injury liability.
True
(T/F) In uninsured motorists coverage, uninsured motorists include drivers of hit-and-run vehicles.
True
(T/F) The insurance company is obligated to pay an uninsured motorists claim only when the owner or operator of the uninsured vehicle is legally responsible for the insured's damages.
True
(T/F) n most states, clients' motorcycles and snowmobiles can be insured under a Personal Auto Policy (PAP) by endorsement.
True
Underinsured motorists coverage
Underinsured motorists coverage provides protection to auto accident victims when a negligent driver has insufficient insurance limits to pay for the damages for which he or she is responsible. Shortcomings are similar to those of the uninsured motorists coverage
Betty frequently uses cars in connection with her business. Does her Personal Auto Policy provide liability coverage when she drives her family car for business purposes?
Unless Betty's business involves use of the vehicle as a public or livery conveyance hired out to carry persons or property, her liability coverage applies.
Driving to Mexico auto coverage
Without an endorsement, the PAP does not provide coverage when an insured is driving in Mexico. Acceptable coverage must be obtained through a licensed Mexican insurance company prior to the trip. Driving in Mexico without such coverage is a criminal offense. Coverage can be purchased at the border. Alternatively, it may be possible to add this protection to an existing PAP if an insurance company is a member of a foreign insurance association; however, this endorsement is primarily used by people who live near the border and occasionally take brief trips to Mexico. The endorsement is effective only if the insured has also purchased liability insurance through a Mexican insurer and coverage is excess over that policy. The main advantage of the endorsement is the ability to have higher liability limits than the Mexican insurance, as well as other policy coverages.
Tom falls asleep at the wheel of his car while driving on the interstate, runs across the median, and causes a tractor trailer truck to flip over while trying to avoid a head-on collision with Tom. The truck driver has a claim for $5,000 of bodily injury; damage to his truck and its contents is $150,000. How much will Tom's Personal Auto Policy pay under Part A—Liability coverage with each of the following limits? a. $100,000/$300,000/$50,000 b. $300,000
a. With split limits, Tom's policy would pay the claim for $5,000 of bodily injury but only $50,000 of the property damage to the truck and its contents. Tom would have to pay the remaining $100,000 out of his pocket unless he has an umbrella liability policy. b. With a single limit of $300,000, all $155,000 of claims for bodily injury and property damage would be paid by Tom's PAP.
an automobile insurance term that refers to the upset of an auto or its impact with another vehicle or object
collision
Unsatisfied judgment funds are established by the state to
compensate persons who are unable to collect a legal judgment resulting from an auto accident. The injured person must obtain a legal judgment against the negligent party and show that the judgment cannot be collected. The maximum claim is usually limited to the state's minimum compulsory insurance requirement and is reduced by collateral sources of recovery. The collection process is slow and cumbersome, and some states' funds are inadequately funded.
unsatisfied judgment funds
compensate persons who are unable to collect legal judgments that result from auto accidents. The injured person—in addition to obtaining a legal judgment against the negligent party—must show that the judgment cannot be collected. The maximum amount that can be collected from the fund is usually limited to the state's minimum compulsory insurance requirement and is reduced by collateral sources of recovery, such as workers' compensation benefits or insurance. The negligent driver must repay the fund for payments made to the injured person or lose his or her driver's license until repayment is made.
The "no pay, no play" concept has been considered by lawmakers in many states as a means of encouraging compliance with ____________________insurance laws. No pay, no play statutes limit the rights of uninsured drivers to collect damages from insured drivers. A few states have recently enacted such laws.
compulsory insurance
a vehicle specifically listed in the policy declarations of an auto insurance policy. In the Personal Auto Policy, "your covered auto" also includes newly acquired autos, trailers, and temporary substitute vehicles.
covered auto
Why should a client consider purchasing uninsured and underinsured motorists coverage even though the state has a compulsory liability insurance law?
even in states with compulsory insurance laws: • Some drivers may not register their vehicles; others may drop insurance after a vehicle is registered. • A person may be injured by a hit-and-run driver, an out-of-state driver without insurance, a driver of a stolen car, or a driver of a fraudulently registered auto. • The required liability limits are relatively low, leaving some motorists underinsured.
If you live in a city and you don't own a car and take public transportation, but you might want to rep a zip car every now and then. Kevin Lynch has a liability policy on any car that he drives
extended nonowned coverage endorsement
a law in all states that requires proof of future auto insurance after certain circumstances occur. These can include an auto accident, conviction for certain traffic offenses, or failure to pay a legal judgment that arises from an auto accident.
financial responsbility law
No-fault auto insurance provides
first-party benefits to injured persons and imposes some restrictions on their rights to sue negligent parties. No-fault has not necessarily resulted in lower premiums. In addition, it restricts the right in some states to sue for pain and suffering, and it shifts some costs of auto accidents from negligent parties to innocent victims.
auto insurance rule of thumb
insurance follows the car if hanna borrows my car and gets into an accident, my insurance is primary and hannas is secondary/ excess
Assume that a son lives with his parents and owns a car without collision coverage. If one of his parents borrows his car, their collision coverage does not apply to an accident they might have as a result of using the car merely because it was at the end of the driveway. Under Part D of their PAP,
it does not fit the definition of either a covered auto or a nonowned auto. If, on the other hand, one of the parents borrows the son's car because their car is in the shop for service, the parents' collision coverage applies, because the car now qualifies as a temporary substitute auto
a no-fault system with the right to sue another party once certain monetary or verbal thresholds are exceeded
modified no fault
in personal auto insurance, an auto that meets a policy's eligibility requirements but is acquired after the effective date of the policy
newly aquired auto
financial responsibility laws (auto)
o A serious auto accident o Conviction of a serious traffic offense o Failure to pay a legal judgement that arose from an auto accident o The court forces you to automobile insurance and prove that you have it prior to getting drivers license back, car back, etc
Gary Rock's PAP provides split limits under Part A of $500,000/$1,000,000/$50,000. In an auto accident, Gary injures two people in another car. One is awarded damages of $750,000 and the other is awarded damages of $300,000. Their car, worth $60,000, is totally demolished. The insurer will pay
only $500,000 of the $750,000 award because that is the per person policy limit for bodily injury. The policy will pay the full $300,000 to the other person. The policy will pay only $50,000 for the damage to the car because that is the policy's property damage limit.
(formerly referred to as comprehensive) an automobile insurance term that refers to physical damage to a vehicle that is not caused by collision
other than collision
endorsement for no fault insurance that is major source of fraud
personal injury protection § Usual name for an endorsement that provides no fault benefits required by state law § Probably represents sources of insurance fraud § Benefits include: · Medical expenses · Rehabilitation expenses · Loss of earnings · Essential services expenses · Funeral expenses · Survivors benefits
the usual name for an endorsement that provides a state's no-fault auto insurance benefits
personal injury protection (PIP) endorsement
a no-fault system with no right to sue a negligent party. No state has a pure no-fault law.
pure no-fault
specialty insurers and government programs that provide insurance for hard-to-insure drivers or property
residual market
the initial portion of a loss under an umbrella policy that must be assumed by the policyowner when there is no underlying policy to cover the loss
self insured retention
in auto liability insurance, separate limits that apply to any one person for bodily injury, to the aggregate for all bodily injury claims in an accident, and to property damage liability claims
split limits
in personal auto insurance, a vehicle not owned by the insured while it is used temporarily in place of a covered auto that is out of normal use because of breakdown, repair, servicing, loss, or destruction
temporary substitute vehicle
Two common package policies for boats are
the boatowners policy for smaller boats the yacht policy for larger boats.
Under uninsured motorists coverage,
the injured insured is able to collect the amount he or she would have collected from the insurer of an insured driver if that driver had been carrying insurance. In effect, the insured's own company acts as the insurer of the uninsured driver.
method of compensation that comes into play when a hit and run occurs
uninsured motorists coverage
a fund in some states to compensate victims who are unable to collect a legal judgment that results from an auto accident. The maximum amount that can be received is usually equal to a state's financial responsibility limits.
unsatisfied judgement funds
Boatowners and yacht policies frequently contain ___________________
warranties
What coverages are available to meet the needs of clients who own watercraft and/or airplanes?
watercraft- liability coverage is available under a homeowners policy, which provides no protection for larger boats and little physical damage protection for any boat. Boatowners policies, for smaller boats, and yacht policies, for larger boats, contain liability coverage, medical payments coverage, uninsured boaters coverage, and physical damage coverage. Also available are coverages for the legal obligation of the policyowner to remove a wrecked or sunken vessel, for liability arising out of transportation of the boat on land, for costs of towing and assistance if the boat is disabled, and for liability to crew members and other maritime workers. Aviation policies for private aircraft pay for bodily injury liability that arises out of the insured's ownership, maintenance, or use of insured aircraft. Coverage also applies to bodily injury liability arising out of the location where the insured aircraft is stored. Medical payments coverage is available to cover passengers, and crew members can be covered for an additional premium. Physical damage coverage is open-perils.
Auto Part D—Coverage for Damage to Your Auto
· Collision- upset of an auto or impact with another vehicle or object · Other than collision- physical damage to a vehicle that is not caused by collision (theft, vandalism, tree ) · The word 'comprehensive' is no longer used because judges discovered benefits that no longer existed
stand alone umbrella policie
· Example for stand alone policies o I have homeowners and auto. Each has $300k liability limits. I'm in car accident and guilty. The judgement against me is $600k. I have 1 mil umbrella. o Judgement comes and my auto company pays up to 300k because that's my limit. The 300k drops down from the umbrella and is paid. o What if I don't have underlying coverage? And same accident occurs? § $600k comes to company and sees I don't have auto. They charge me a self-insured retention (SIR) · The initial portion of a loss under an umbrella policy that must be assumed by the policyowner when no underlying policy covers the loss · (like a deductible) · $1,000 from your umbrella
Auto Part C—Uninsured Motorists Coverage
· Includes underinsured · Pays damage to the insured if they're entitled to recover from owner/operator of an uninsured motor vehicle who is legally responsible to pay and they either have no insurance or liability limits are lower than applicable state law · Protects you from hit and run! · Protects you from insurance companies becoming insolvent
Auto Part B—Medical Payments Coverage
· This is for you and yours! In homeowners, this is just for others · Pays medical expenses of injured auto occupants including named insured, spouse, family members · Applies regardless of fault · If you have PIP, you don't purchase medical payments coverage because its included within PIP · Nominal limits, $1,000-$10,000
For purposes of Part C, an uninsured vehicle is not only one without insurance. The term also includes
• One with no insurance • One with liability limits lower than the applicable state law requires • One driven by a hit-and-run driver • One whose insurer denies coverage or becomes insolvent
Format of the PAP
• Part A—Liability Coverage • Part B—Medical Payments Coverage • Part C—Uninsured Motorists Coverage • Part D—Coverage for Damage to Your Auto
Types of No-Fault Auto Laws
• Pure no-fault: right to sue negligent party would be eliminated DOES NOT EXIST • Modified no-fault: right to sue negligent party only if injuries exceed a dollar or verbal threshold • Add-on no-fault: right to sue negligent party in addition to right to collect first-party no-fault benefits • Choice no-fault: right to sue negligent party as an alternative to collecting under a modified no-fault plan
various other methods of ensuring compensation for auto accident victims have been developed over the years. These include
• compulsory insurance • financial responsibility laws • unsatisfied judgment funds • uninsured motorists coverage • underinsured motorists coverage • no-fault auto insurance
Problems Associated with Auto Accidents and Auto Insurance
• large number of auto accidents • high cost of auto accidents • uninsured and underinsured drivers difficulty that some individuals have in obtaining auto insurance
Auto Part A -What is covered? • Who are the insureds? • What exclusions apply? • What happens when other insurance also covers a claim?
- Part A of the PAP provides bodily injury and property damage liability protection to any insured who is legally responsible for an auto accident. -The insureds under Part A include several categories of persons. From the policyowner's standpoint, the most important category is probably the named insured, spouse, and family members for legal liability arising out of the ownership, maintenance, or use of any auto or trailer. There is also coverage for any other person using a covered auto -exclusions: Intentional loss, nonpermissive use, some business situations, injury to employees, property being transported, motorcycles, unlisted vehicles available for regular use -insurance follows the car
Auto Part B -What is covered? • Who are the insureds? • What exclusions apply? • What happens when other insurance also covers a claim?
- Part B of the PAP provides payment for the reasonable and necessary medical expenses of a covered auto's occupants who are accidentally injured. Only those expenses that result from medical services rendered within 3 years of the date of an accident are covered. Benefits are paid under medical payments coverage regardless of fault. -The medical payments coverage of the PAP protects the occupants of a covered auto who are accidentally injured, regardless of fault. For example, a young couple who are injured while riding to their high school prom in a rented limousine are covered under their parents' personal auto policies. -With a few minor exceptions, the exclusions that apply to Part B are the same as those for Part A. -The other insurance provision that applies to medical payments coverage is similar to the one for liability coverage. Coverage is excess over other collectible auto insurance on a nonowned auto that provides payments for medical or funeral expenses. Therefore, although the couple on their way to a prom are indeed covered by their parents' PAP, it is excess over any medical payments coverage on the limousine.
Auto Part C -What is covered? • Who are the insureds? • What exclusions apply? • What happens when other insurance also covers a claim?
- Part C of the PAP provides uninsured motorists coverage (and underinsured motorists coverage in many states). Under Part C, the insurer agrees to pay compensatory damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury (and property damage in a few states) sustained by an insured and caused by an accident.The coverage applies to claims for medical expenses, lost wages, and pain and suffering, but it does not include punitive or exemplary damages insured: The insureds under Part C include the named insured, his or her spouse, and any family members. They also include any other persons who occupy a covered auto. In addition, anyone else who is entitled to recover damages because of bodily injury to any of the previously mentioned persons is an insured. This includes, for example, the spouse of a passenger injured while riding in the covered auto if a claim is brought for loss of consortium. excludes: when insured is injured while occupying or struck by an auto that is owned by the insured but is not covered under the policy. other insurance: Assume Policy A provides $25,000 of uninsured motorists coverage and Policy B provides $50,000 of coverage. The maximum amount of coverage is then $50,000. Policy B will pay the entire claim if it is the primary policy. If Policy A is primary, it will pay the first $25,000 of a claim, and Policy B would pay the next $25,000.
what vehicles are typically eligible for coverage under a personal auto policy
A personal auto policy can be written on eligible vehicles owned or leased by an individual or by a husband or wife residing in the same household. Vehicles with other forms of ownership can be insured with an endorsement. Eligible vehicles include private passenger autos, such as cars, vans, and sports utility vehicles, owned by the policyowner or leased under a written contract of 6 continuous months or longer. Also eligible are newly acquired autos, trailers, temporary substitute vehicles, and pickups with a gross vehicle weight rating of 10,000 pounds or less. Vans and pickups are ineligible for coverage under some circumstances when used for the transportation or delivery of goods and materials. Other vehicles, such as motor homes, motorcycles, golf carts, and snowmobiles, can be insured by endorsement in most states.
Why should a client who has rather high limits of liability in her personal auto and homeowners policies consider also purchasing a personal umbrella liability policy?
A personal umbrella policy is designed to provide liability coverage for catastrophic legal claims or judgments. Without broad liability insurance of sufficiently high limits, individuals face the possibility of having assets and/or income seized to pay a legal judgment. The umbrella policy covers bodily injury and property damage liability, as well as personal injury liability. Most personal umbrella policies also pay defense costs not payable by underlying policies, and they provide other supplementary coverages similar to those in the homeowners and PAP policies (premiums on appeal bonds, expenses incurred at the company's request, and so forth).
On a family vacation, you rent a car and turn down the loss damage waiver the rental company offers. Which coverage in your Personal Auto Policy would provide you with coverage for damage to the rental car (minus any deductible) when the rental car is badly dented when you hit a deer while you are driving at night.
Damage to the nonowned auto caused by the contact of that auto with an animal is covered under Part D's other-than-collision coverage
(T/F) Financial responsibility laws require owners of autos to carry liability insurance before a vehicle can be registered.
False. Compulsory insurance laws require owners of autos to carry liability insurance before a vehicle can be registered. Financial responsibility laws only require proof of future financial responsibility under certain circumstances.
(T/F) Uninsured and underinsured motorists coverages are unnecessary in states with compulsory liability laws.
False. Even in compulsory liability states, there are many uninsured and even unlicensed drivers. Also, many drivers carry only the limits required by law and thus are underinsured. Therefore, uninsured and underinsured motorists coverages are necessary even in states with compulsory liability laws.
(T/F) If a client has $100,000/$300,000/$50,000 limits of liability in her PAP, she would be fully covered if sued for $150,000 for bodily injury and $20,000 for property damage by the driver of another car who is injured as a result of an auto accident that was the client's fault.
False. If a client has $100,000/$300,000/$50,000 limits of liability in her PAP, she would be fully covered for the $20,000 of property damage, but she would be covered only to the extent of $100,000 of the other driver's bodily injury claim.
(T/F) Medical payments coverage under the PAP applies only to persons other than the named insured.
False. Medical payments under the PAP cover the insureds as well as other people riding in the insured's car. Insureds are covered while occupying a motor vehicle designed for use on public roads or when struck as a pedestrian.
(T/F) No-fault benefits in most states are limited to medical expenses.
False. No-fault benefits in most states include rehabilitation expenses, loss of earnings, expenses for essential services, funeral expenses, and survivors' benefits, as well as medical expenses.
(T/F) Under most no-fault laws, the right to sue the negligent party, even for pain and suffering, has been eliminated.
False. Under most no-fault laws, the right to sue the negligent party exists once a dollar or verbal threshold has been met. No state has adopted a pure no-fault law.
While driving his car, Jack sustained medical expenses and lost wages due to bodily injury when a drunk teenager driving his own car ran a red light and hit him. Jack in no way contributed to the accident through his own fault. How would the settlement be handled if Jack's bodily injuries equaled $40,000 and the accident occurred in a state with a modified no-fault law containing a $5,000 threshold
If the accident occurred in a state with a modified no-fault law containing a $5,000 threshold, John's own insurer would pay for lost wages and medical expenses from benefits available under his no-fault coverage. (Even if he is from a state without no-fault, his PAP will automatically provide no-fault coverage when he is driving in a no-fault state.) Because his bodily injuries exceed the $5,000 threshold, he can sue the other driver for bodily injury losses, including pain and suffering. His insurance company would be reimbursed to the extent that any of the amount from the legal judgment duplicates the no-fault benefits received. If the teenager had no liability coverage or less than the amount of John's uninsured and underinsured motorists coverages, those coverages in John's own policy would respond for the amount unpaid in excess of the no-fault benefits.
A client with a PAP who frequently borrows her friend's car asks, "Whose liability insurance would cover a liability claim that results from an accident while I'm driving my friend's car?"
If the friend's car is furnished for the client's regular use, the client's PAP provides no coverage; a court might need to determine whether the facts of this situation involve a car furnished for the client's regular use. Assuming coverage applies, when a person drives a friend's car, the first person is a named insured under his or her own PAP while driving another auto. He or she is also an insured under the friend's PAP as a person using the covered auto. In this situation, the friend's policy is primary because it covers an "owned vehicle," and the driver's insurance is secondary or excess because he or she is driving a "nonowned vehicle." The driver's policy will pay only on an excess basis after the limits of the owner's policy are exhausted.
While driving his car, Jack sustained medical expenses and lost wages due to bodily injury when a drunk teenager driving his own car ran a red light and hit him. Jack in no way contributed to the accident through his own fault. How would the settlement be handled if Jack's bodily injuries equaled $40,000 and the accident occurred in a state with compulsory liability insurance
In a state with compulsory liability insurance, John would sue the driver of the other car and, given the assumptions with regard to fault, receive payment for the $40,000 in bodily injury plus any pain and suffering to the extent of the liability coverage on the other car. If the teenager had no liability coverage or less than the amount of John's uninsured and underinsured motorists coverages, those coverages in John's own policy would respond.
