A wide variety of damages, conditions, and costs are not covered by your PAP. Your policy describes a number of situations that are specifically excepted or excluded from coverage—these are called “exclusions.” Your policy also describes certain limitations on the amount of coverage you are entitled to receive under the policy—these are called “limits of insurance” and “limits of liability.” Some exclusions and limitations that were originally included in your policy can be changed by endorsement. For these reasons, you should carefully read your PAP to learn the exclusions and limitations that apply to your specific situation.
Exclusions
The following are just a few examples of situations when you’re not covered by your PAP:
- When you intentionally cause property damage or personal injury
- When your actions cause damage to property you own, rent, use, or take care of
- When you use a vehicle without the reasonable belief that you are entitled to do so
- Loss that occurs while a vehicle is being used as a public or livery conveyance (like a taxi or a limo)
- Damage to a vehicle from wear and tear or mechanical breakdown
- When you’re driving your employer’s truck or van during the course of your employment
The preceding examples also apply to situations involving your spouse, family members, and strangers. Each of the four coverage types (liability, medical payments, uninsured motorists, and physical damage) comes equipped with a lengthy list of exclusions, so make sure you read your policy carefully.
Limitations
Your PAP places limitations on your coverage in a number of ways:
Coverage Limits
The Declarations Page of your policy recites maximum coverage amounts that limit what your insurance company must pay. Separate limits are set for liability, medical payments, uninsured motorists, collision, and comprehensive coverages. Many states have financial responsibility or compulsory insurance laws that require you to purchase no less than certain specified coverage limits for liability, medical payments, and uninsured motorists’ coverage. Thus, if you are injured in a car accident and your medical costs total $150,000, your insurance company must pay no more than the $5,000 limit (per person) recited on the Declarations Page of your policy.
Limits of Liability
Your policy sets limits for liability, medical payments, and uninsured motorists coverages, representing the most that your insurance company will pay in connection with any one auto accident. This means the number of insured persons, claims, and vehicles involved in any one accident does not affect the amount your insurance company will pay. Thus, a PAP with an uninsured motorists limit of $300,000 will pay no more than $300,000 if an uninsured motorist strikes a single car; it will also pay no more than $300,000 if that same uninsured motorist causes a five-car accident. Medical payments coverage is sometimes expressed as a limit of so many dollars per accident per person rather than an aggregate figure per accident.
Physical Damage Coverage
Your coverage for collisions, theft, and other covered physical damage is not limited per accident in the same fashion as liability, medical payments, and uninsured motorists coverages. Instead, in the case of damage or theft, most PAPs will pay you the actual cash value of the damaged or stolen property. Actual cash value is calculated as the replacement cost of the property less depreciation (the diminution in value due to the passing of time and wear and tear).
Next week we will discuss endorsements and deductibles. In the meantime, if you have questions, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
