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Most insurance companies use the Personal Auto Policy (PAP) by the Insurance Services Office for insuring personal vehicles, although some insurers, such as State Farm and Allstate use their own forms.
The PAP covers personal vehicles, but not recreational vehicles. The PAP also covers pickups or vans weighing less than 10,000 pounds, if they are not used for business delivery, except for incidental use of installing, repairing, or maintaining furnishings or equipment, such as would be the case for a carpenter or plumber; or if used in ranching or farming.
Covered autos include any listed in the declarations section of the insurance contract; a newly acquired vehicle; a trailer owned by a named insured; or a temporary substitute vehicle. It also includes any personal vehicle leased for at least 6 months.
A newly acquired vehicle has the broadest coverage of any vehicle shown in the declarations, except collision coverage. Coverage begins when you are the new owner. For coverage for collision and other-than-collision damage, you must notify the insurer within 14 days, if any of the vehicles in the declarations section has such coverage. If not, then notice must be given within 4 days. However, if it is an additional vehicle, the insurer must be notified with 14 days.
A temporary substitute vehicle is any vehicle that you are driving because you are unable to use your insured vehicle, and you do not own the temporary vehicle.
Automobile liability coverage pays for any damages and liabilities that you are legally obligated to pay for, and also pays defense costs. The cost of defense is over and above the limit of liability. However, no defense is provided if the liability is not covered. When the liability is covered, the insurer has the right to investigate and settle any claims independently of the insured.
The limit of liability can be a single limit or a split limit. The standard policy provides for a single limit that is the limit for all liability, no matter how it is apportioned. By using an endorsement, many people opt for a split limit. A split limit divides the limit of liability into 3 parts: the limit for each person, the total limit, and limit for property damage. The split limit is expressed in the format ###/###/### in thousands. Thus, a split limit of 100/300/50 would have a limit of liability of $100,000 for each person, a total limit of $300,000, and a limit of $50,000 for property damage.
For instance, suppose you injure 3 people and caused $25,000 damage to their car. One is severely injured with $125,000 worth of damages, one is moderately injured with $75,000 of damages, and the other is the least injured with $50,000 of damages. If your policy had a single limit of $300,000, then you would be entirely covered. With a 100/300/50 split policy, $25,000 of damages to the severely injured person would not be covered. You would have to pay for that.
The automobile medical payments coverage is a no-fault payment for injuries or funeral expenses caused by vehicles designed for the road to the insured to prevent the need for litigation. Thus, if the insured is a passenger in a car or riding public transportation, or was simply walking, and is injured by a motor vehicle, she will be covered. However, there is no coverage when the vehicle is not designed for road travel, such as tractors or bulldozers, nor does it cover her if she is a passenger on a motorcycle. Only expenses incurred within 3 years of the accident will be paid.
Most states require licensed drivers to have to at least a minimum amount of auto insurance. However, many drivers, nonetheless, drive without insurance. The Uninsured Motorists Coverage will cover the insured if they suffer damages from uninsured motorists, which are defined as drivers without insurance, drivers with less than the required minimum, hit-and-run drivers, and drivers insured by insolvent insurance companies.
However, it does not cover underinsured motorists. So, if you are injured by someone that has insurance, but not enough to cover your damages, then you will not get any more than what you can collect from the person that injured you and his insurance company. However, you can purchase an endorsement for underinsured motorists insurance. Any deficiency of compensation for injuries caused by someone with inadequate insurance to cover your losses can be collected from your own insurance company, up to the policy limits.
There are 2 different types of coverage for your auto: collision and other-than-collision, or what is sometimes called comprehensive coverage. Collision coverage covers any damage caused by a collision with another vehicle or object. Other-than-collision coverage covers damage from anything else, which includes missiles or falling objects; fire; theft or larceny; explosion or earthquake; windstorm; hail, water or flood; malicious mischief or vandalism; riot or civil commotion; collision with animals; or breakage of glass. Although collision coverage usually has a deductible, some of the damage covered under the other-than-collision coverage has no deductible.
Generally, the loss settlement consists of actual cash value or the cost of repair. If the cost to repair the vehicle is greater than its worth, then the loss will be declared a total loss, and the actual cash value for the vehicle will be paid.
If the vehicle can be repaired, the insurer will usually use cheaper after-market parts, unless the vehicle is fairly new. If the insured insists on original manufacturer’s equipment (OEM) for an older vehicle, then he will have to pay for the betterment by paying the difference between the price of the OEM part and the after-market part.
The 2005 edition of the personal auto policy includes up to $1,000 coverage for most electronic equipment that is permanently installed.
As with almost all insurance contracts, the insured has certain duties in the event of a loss, which if neglected, can nullify coverage under the policy.
Most duties are commonsensical. Notify the insurer in the event of a loss, and tell the insurer how, when, and where the loss occurred, so that it can be investigated. The insured must protect the property from further damage, and the insurer will pay reasonable costs, such as towing and storage for its safekeeping. The insured will also have to cooperate with the insurer in providing evidence, testimony in court or for discovery, and help in finding or identifying witnesses.
If the loss is caused by a collision with another vehicle, especially if it was a hit-and-run collision, the insured must notify the police immediately after the incident or after it is discovered.
Some of the general provisions, which are part of most insurance contracts, include the following:
Usually excluded from the standard auto insurance policy are motorcycles, mopeds, motorscooters, motor homes, snowmobiles, and most other recreational vehicles. Coverage can be obtained by purchasing a miscellaneous-type vehicle endorsement. However, a snowmobile requires a different endorsement. One primary difference between the personal auto policy and motorcycle coverage is that liability is not covered on a nonowned motorcycle, unless it is a temporary substitute. In this case, the insurance of the owner of the motorcycle would apply.
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