What Is PAP Insurance and What Does It Cover?

A Personal Automobile Policy (PAP) is an insurance contract designed for individuals and families to protect against financial losses from incidents involving their personal vehicles. It offers financial protection against risks like accidents, theft, and other damages, specifically for personal, non-commercial use.

Core Components of a Personal Automobile Policy

A Personal Automobile Policy comprises several distinct coverages. These address various potential losses, from damages to others to repairs for your own vehicle.

Liability coverage

Liability coverage addresses your legal responsibility for damages or injuries you cause to other parties in an accident. It divides into two areas: bodily injury liability and property damage liability. Bodily injury liability covers medical expenses, lost wages, and legal fees for others injured in an at-fault accident. Property damage liability pays for damage to another person’s vehicle or property if you are responsible. Most states mandate minimum levels of both bodily injury and property damage liability coverage, though higher limits are often recommended.

Medical Payments Coverage

Medical Payments Coverage, or MedPay, covers medical and funeral expenses for you and your passengers after a car accident, regardless of fault. In some states, Personal Injury Protection (PIP) offers similar medical expense coverage, extending to lost wages and essential services if injuries prevent you from working. MedPay is often optional, while PIP is mandatory in “no-fault” states and has a broader scope.

Uninsured/Underinsured Motorist (UM/UIM) coverage

Uninsured/Underinsured Motorist (UM/UIM) coverage protects you if you are in an accident with a driver who has no insurance or insufficient insurance. Uninsured Motorist Bodily Injury (UMBI) covers medical bills, lost wages, and pain and suffering if an uninsured driver is at fault. Uninsured Motorist Property Damage (UMPD) covers vehicle repairs if an uninsured driver damages it. Underinsured motorist coverage (UIM) applies when the at-fault driver’s liability limits are insufficient to cover your total damages. Many drivers operate vehicles without adequate insurance, making UM and UIM coverages important.

Collision coverage

Collision coverage covers physical damage to your vehicle from a collision with another vehicle or object, regardless of fault. It is important for newer or more valuable vehicles. A deductible applies, which is the amount you pay out-of-pocket before your insurer covers the remaining costs.

Comprehensive coverage

Comprehensive coverage pays for damage to your vehicle from non-collision events. This includes theft, vandalism, fire, natural disasters, falling objects, and collisions with animals. Like collision coverage, it involves a deductible. Lenders often require both collision and comprehensive coverage if you are financing or leasing a vehicle, as they protect the lender’s investment.

Who and What is Covered by a Personal Automobile Policy

A Personal Automobile Policy covers specific individuals and vehicles.

The “who” covered by a PAP

The “who” covered by a PAP includes the named insured listed on the policy. It also covers resident family members, such as a spouse, children, or other relatives living in the same household. Additionally, it covers any person using the insured vehicle with permission, known as a “permissive user.” If you lend your car to a friend, your policy typically provides coverage for them.

Regarding “what” vehicles are covered

A PAP primarily covers vehicles listed on the policy. Coverage can also extend to other vehicles under specific circumstances. Newly acquired vehicles are usually covered automatically for a grace period, allowing time to notify the insurer. Temporary substitute vehicles, like a rental car used during repairs after a covered loss, are also covered.

A PAP also provides coverage for non-owned vehicles, such as a borrowed car. In these cases, your policy might offer secondary coverage, meaning the vehicle owner’s policy is primary.

Common Exclusions in a Personal Automobile Policy

A Personal Automobile Policy offers extensive protection, but certain situations and uses are not covered. These standard exclusions limit the insurer’s liability for risks outside a personal policy’s scope.

Commercial use of a personal vehicle

Commercial use of a personal vehicle is a common exclusion. A standard PAP is for personal driving activities like commuting or errands. Using your vehicle for business purposes, such as ride-sharing or delivering goods, is not covered. Individuals engaging in such activities need a separate commercial auto insurance policy or a specific endorsement.

Intentional acts

Intentional acts are excluded. If an insured person intentionally causes damage or injury, the PAP will not provide coverage. This applies to deliberate actions, not accidents.

Participation in racing or speed contests

Participation in racing or speed contests is excluded. If an accident occurs while the vehicle is used in any racing event or speed contest, the policy will not cover the damages or injuries. This applies to both sanctioned and informal competitions.

Vehicles not listed or declared

Vehicles not listed or declared to the insurer are not covered. While a grace period exists for newly acquired vehicles, failure to add a vehicle within the specified timeframe results in no coverage.

Vehicles furnished for regular use

Vehicles furnished for regular use, such as a company car, are not covered under a personal auto policy. These vehicles are usually covered by the employer’s commercial insurance policy. The personal policy covers vehicles owned or leased by the individual for personal use, not those provided by another entity.