Personal Auto Policy
The Personal Auto Policy (PAP) is intended for individuals and families who own or lease private passenger cars. A separate policy is available for businesses and other organizations that own commercial vehicles. Unrelated people who live in the same household and share ownership of a vehicle may be insured, provided each is listed on the policy.
Under most auto policies, a person is covered when they use any car. This means that you have coverage under your own policy while driving someone elses car. Also, people who use your car with your permission are covered on your auto policy. Lets say you loan your car to a friend who uses it to go skiing. While returning from the trip, they have an accident and injure several people in another vehicle. Your friend would be insured under your policy.
Keep in mind that accidents or claims submitted under your auto insurance can affect your premiums, be sure to only lend your car to responsible drivers.
Anyone who drives a car must be a careful and responsible driver and, if you are not, you could be held legally responsible for any injuries or damage you cause to others. When you become liable to someone, you must reimburse them for any damages they suffer as a result of your carelessness.
The legal term for carelessness is negligence, meaning you had a duty to behave in a certain way and you breached that duty. Your auto insurance policy provides liability protection including defense. Make sure you select high liability limits for the best coverage.
Every state has a financial responsibility law. These laws require people to provide proof that they are financially responsible in certain circumstances:
- Following an accident in which someone is injured
- Following an accident in which there has been property damage in excess of a certain amount, usually $500
- After conviction for a serious driving offense, such as a DUI, reckless driving, or vehicular manslaughter
- When a drivers license has been suspended or revoked, prior to its reinstatement
- If the driver has failed to pay money owed from previous accidents
Financial responsibility laws vary by state, but all involve an amount of money for each person injured in an accident, a total amount for all persons injured in an accident, and a separate amount for damage to property.
The most common method used to demonstrate financial responsibility is with an automobile insurance policy. Check your Department of Motor Vehicle website for the minimum financial responsibility liability limits in your state.
This coverage pays for medical expenses for you, your family and passengers in your car who may be hurt during an auto accident. You are also covered when you are a passenger in another vehicle or if a vehicle hits you as a pedestrian. This coverage is not based on fault, so you are entitled to the coverage even if you are the cause of the accident.
The limit for medical payments applies per person, and there is no limit on the number of persons covered. Most people purchase a limit of between $1,000 and $5,000 for this coverage, although higher limits are available.
Uninsured motorists coverage pays you if you are struck by someone who does not have insurance. It also would pay if you were hit by a hit-and-run driver.
An auto policy also covers damage to your vehicle either from an auto accident or other types of damage, such as broken windshield. However, not everything is covered. Costs associated with flat tires, tire blow-outs, trouble with your engine or mechanical issues are not covered.
There is no limit in the section of a personal auto policy for damages. The amount you will receive if your car is damaged is the actual cash value of the vehicle, or the cost to repair the damage.
In some cases the amount to be paid by the insurance company is simply the cost to make repairs to the vehicle and a check is usually issued to the body shop.
In other cases, the vehicle is totaled, meaning the cost to repair it is more than the value of the car. In this case, the insurer will pay a sum of money as compensation for the loss of the car.