Study guide
5.1 Personal Auto Policy Overview
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
5.1 Personal Auto Policy Overview
Key Takeaways Explain This Topic AI
The ISO Personal Auto Policy (form PP 00 01) has SIX parts: A (Liability), B (Medical Payments), C (Uninsured Motorists), D (Coverage for Damage to Your Auto), E (Duties After an Accident or Loss), F (General Provisions)
"You" and "family member" are the two pivotal defined terms: the named insured plus a resident spouse is "you," and a resident relative by blood, marriage, or adoption is a "family member"
Eligible vehicles are private passenger autos, plus pickups and vans with a Gross Vehicle Weight Rating of 10,000 pounds or less not used to deliver goods
A newly acquired auto gets automatic coverage but must be reported within 14 days (4 days if no auto on the policy already carries physical damage)
Auto liability insurance is mandatory in 49 states; New Hampshire is the lone exception, and roughly 15% of drivers nationally are uninsured (Insurance Research Council, 2023)
Last updated: June 2026
The Personal Auto Policy at a Glance
The Personal Auto Policy (PAP) is the contract used to insure individually owned private passenger vehicles. The most widely tested version is the Insurance Services Office (ISO) form PP 00 01 . The PAP is written in plain, simplified language and uses defined terms that drive almost every coverage question on the exam. Two terms matter most: "you" (the named insured shown on the Declarations and that person's resident spouse) and "family member" (a person related to the named insured by blood, marriage, or adoption who is a resident of the same household, including a ward or foster child).
Memorize this distinction. The named insured's coverage is the broadest; a family member's coverage is nearly as broad; everyone else is covered only in narrow situations.
The Six Parts of the PAP
- Part Name What It Does
- Part A Liability Coverage Pays third parties for bodily injury and property damage you are legally liable for
- Part B Medical Payments Pays your and passengers' medical bills regardless of fault (first-party)
- Part C Uninsured Motorists Pays your injuries when the other driver has no or too little insurance
- Part D Coverage for Damage to Your Auto Collision and Other Than Collision for your own vehicle (first-party)
- Part E Duties After an Accident or Loss The insured's obligations: notice, cooperation, proof of loss
- Part F General Provisions Policy-wide rules: territory, termination, legal action, subrogation
A quick mnemonic for the coverage parts is LMUP — L iability, M edical, U ninsured motorists, P hysical damage — followed by the two administrative parts E and F.
Who Is an "Insured"
Who qualifies as an insured depends on which vehicle is being driven.
- Driver Your covered auto Any other (non-owned) auto
- Named insured ("you") Insured Insured
- Resident spouse Insured Insured
- Resident family member Insured Insured
- Any other person using your auto with permission Insured NOT insured
Key trap: A permissive user (a friend who borrows your car) is an insured only while in your covered auto . The named insured and family members keep coverage even in someone else's car; an outside permissive user does not.
A divorced spouse who moves out is no longer a resident and loses "you" status. A child who moves into a separate household ceases to be a "family member," but a college student who is only temporarily away — still a household resident — generally remains covered.
What Counts as "Your Covered Auto"
The definition of "your covered auto" has four buckets:
Any vehicle shown in the Declarations.
A newly acquired auto (additional or replacement).
Any trailer you own.
A temporary substitute — a non-owned vehicle you use while a covered auto is out of normal use for breakdown, repair, servicing, loss, or destruction.
Eligible vehicles are private passenger autos and pickups or vans with a Gross Vehicle Weight Rating (GVWR) of 10,000 pounds or less that are not used to deliver or transport goods for a fee.
Newly Acquired Auto — the Reporting Rule
A newly acquired auto is automatically covered, but the reporting window is exam gold:
Situation Liability / Medical / UM Physical Damage (Collision & OTC)
Policy already covers at least one auto with physical damage Automatic; report within 14 days Automatic; report within 14 days
Policy has NO auto with physical damage Automatic; report within 14 days Automatic, but you must ask the insurer within 4 days
Correction to a common error: the window is 14 days (or 4 days for physical damage when no vehicle carries it) — it is not “14–30 days.”
Mandatory Insurance and the Market
Auto liability insurance is mandatory in 49 states ; New Hampshire is the only state that does not require it (a NH driver must still prove financial responsibility after an at-fault accident). Roughly 15% of U.S. drivers are uninsured (Insurance Research Council, 2023), ranging from about 5.7% in Maine to 28.2% in Mississippi. Penalties for driving uninsured include fines, registration and license suspension, vehicle impoundment, and a state filing such as an SR-22 certificate of financial responsibility.
Trailers and Temporary Substitutes
A trailer the named insured owns is automatically part of "your covered auto," but the PAP narrows its protection: trailers receive liability coverage automatically, while physical damage on a trailer generally requires it to be shown on the Declarations or otherwise scheduled. A temporary substitute vehicle — a loaner or rental used while a covered auto is being repaired, serviced, or is destroyed — inherits the same coverage the disabled covered auto carried.
The substitute must be a non-owned vehicle used because the covered auto is temporarily out of normal use; a vehicle furnished for the insured's regular use does not qualify.
Why the Defined Terms Decide the Question
Nearly every PAP claim question can be solved by answering two questions in order: (1) Is the person an insured for this situation? and (2) Is the vehicle a covered auto or a permitted non-owned auto? Because the named insured and family members carry their coverage with them into other people's cars, while outside permissive users are covered only inside the covered auto, a single fact — who was driving what — usually changes the answer. The exam tests this relentlessly, so train yourself to identify the driver's status before reaching for a coverage part.
The Declarations Page
The Declarations page personalizes the PAP. It lists the named insured and address, the policy period, each covered auto by year/make/model and vehicle identification number, the coverages purchased and their limits, the deductibles for Part D, the premium, the lienholder or lessor, and any endorsements. When a question asks whether a coverage applies, the Declarations control whether the insured actually bought that coverage — for example, an insured with no Part D shown has no Collision or Other Than Collision protection at all, no matter how the loss occurred.
Reading the Declarations first prevents the classic error of assuming a coverage the insured never purchased.
Other Insurance
When more than one auto policy could apply, the PAP's Other Insurance rules in Part F govern. For a covered auto the policy is generally primary ; for a non-owned auto the named insured or family member is driving, the PAP is typically excess over any other collectible insurance on that vehicle. When two excess policies overlap, each pays its share of the loss in proportion to its limit. These priority rules feed directly into the UM/UIM and physical damage scenarios later in the chapter.