The personal auto policy (PAP) can be written on eligible vehicles owned and leased by an individual or by a husband or wife residing in the same household. A vehicle rented to others for public use is not eligible and must be insured under a commercial policy.

Most vehicles such as cars, mini-vans, and sport utility vehicles are eligible for a personal auto policy. If vans, trucks, or other types of large vehicles are used for transportation or delivery of good and materials they typically are disqualified for a personal auto policy.

The risk exposures that must be considered when evaluating a PAP include the following:

  • Damage done to someone else's body or property
  • Medical expenses involved
  • Repair of your own vehicle in an accident
  • Accidents involving uninsured motorists
  • Temporary insurance on rental cars used while on vacation
  • Rental car reimbursement for an accident or longer term service issues

Practice Question:
Which of the following vehicles would be covered under Kevin's personal auto policy?
I. A pickup truck that he uses in his business for deliveries
II. A new car that was purchased last week
III. His son's car listed on a separate insurance policy
IV. A car rented by Kevin for the family vacation

A. I and II only
B. II and III only
C. III and IV only
D. II and IV only

Answer: D
Trucks used for business delivery are insured under commercial vehicle policies. Since Kevin's son has a separate insurance policy, he would not be covered under Kevin's personal auto policy.


Risk Exposure from Liability

Related Articles
  1. Insurance

    The Facts About Rental Car Insurance

    Find out if the extra insurance is really worth it.
  2. Insurance

    Millennials Guide: Picking the Right Car Insurance

    Millennials fall into the category of high car-insurance rates. Check out some of the ways to save money, like owning an older car or leasing a vehicle.
  3. Insurance

    Car Insurance Add-Ons That May Be Worth The Money

    Many auto insurance add-ons are unnecessary in most situations and will simply drain money out of your pocket. There are several that are worth adding on to make sure that you are adequately ...
  4. Insurance

    How To Reduce Auto Insurance Costs

    Owners can decrease their costs by following a few simple steps.
  5. Insurance

    The 5 Best Car Insurance Companies of 2016

    Getting a great deal on automotive insurance requires you to shop around. So which are the best car insurance companies of 2016?
  6. Tech

    How Smart Cars Are Disrupting Insurance Companies

    Internet connected, autonomous and smart cars are posing new threats to the insurance industry, which is taking steps remain competitive
  7. Personal Finance

    The Complete Guide To Buying A Used Car

    Everything you need to know about buying a used car.
  8. Retirement

    Is It Worth Buying a New Car If You're Already Retired?

    You have to consider more than just the purchase price: Insurance, the warranty, resale value and how much you plan to drive are all important factors.
  9. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center