The Personal Auto Policy (PAP)

personal auto policy

For many Americans, a car is the single most costly property they own and for most others, second only in value to their homes.  For most, a car is also essential to their life style, since contemporary American society has been built around individual auto ownership rather than, say, widespread access to good public transportation. Many families own more than one primary car, as well as supplementary vehicles, such as RVs or golf carts. 

Driving is a skill. To do it right, the driver needs to be alert, focused, responsible, and sensible. Not all drivers meet those criteria. They get into accidents with other cars or just by themselves. But even careful drivers cannot always avoid accidents.  

Since 1971, the Insurance Services Office (ISO) has been providing property/casualty insurance companies with comprehensive risk data and analysis and model insurance policy language. ISO’s actuaries and legal experts write standardized policy language which is the foundation on which many insurers build their coverage programs. Among ISO’s forms is the model Personal Auto Policy (PAP). Here’s a brief look at what the PAP covers. 

You Injure Someone ia Car Accident 

Somebody has to pay for the damage cars and drivers do to other cars and the medical costs of the injuries accidents cause. States do not want this burden falling on them. That is one reason every state has some form of motorist financial responsibility law. These laws require drivers to demonstrate they are able to pay the costs for any accidents they cause. Most states require the purchase of auto liability insurance in minimum amounts set by law to cover at least a portion of motorists’ legal liability to others. 

Most commonly, liability limits are written as a split limit. A split limit will be written like 25/50/25. The first number ($25,000) represents the amount per person that could be paid for bodily injuries incurred as a result of the accident. The second number ($50,000) is the amount that could be paid, up to a maximum total, for all bodily injuries incurred in the accident. The third number ($25,000) describes the payment that could be issue for all property damaged in the accident. Remember, this coverage is for others involved in your accident, not for you or your vehicle.  

For example, Texas motorists are required to carry bodily injury and property damage liability insurance. Minimum limits are 30/60/25. The state requires motorists to show proof of insurance when they:     

  • are asked for it by a law enforcement officer; 
  • have an accident; 
  • register a car or renew its registration; 
  • obtain or renew a driver’s license; or 
  • get a car inspected.  

 Someone Steals Your Car or Damages It 

Comprehensive coverage, on the other hand, pays for repairs to your vehicle when it is damaged by something other than a collision. A rock flies up and breaks your windshield. Or maybe your car gets stolen. Or you hit a deer that runs out in front of you. Comprehensive insurance covers the damages. It also covers damage from natural disasters such as fire, wind, hail, and flood. What comprehensive doesn’t cover is any type of auto accident damage. 

You Have an Accident 

Collision insurance pays for your vehicle to be repaired after you collide with another vehicle or an object such as a tree. If you crash into a wall, fence, or another car, your collision coverage pays for damages even if it’s your fault. 

Miscellaneous Coverge 

The ISO Personal Auto Policy also offers these coverages: 

  • Medical – Pays medical expenses for injury in an auto accident no matter who is at fault. 
  • Uninsured/Underinsured Motorist – If you get into an accident with someone who has no insurance, or insufficient insurance, these coverages provides a backup that pays for the damages. 
  • Rental Reimbursement – Pays for a rental car while repairs are being made to damages due to an accident. 

Want to know more about personal auto insurance? Check out our Property and Casualty courses and PAP courses in our insurance continuing education classes. 

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How Workers’ Compensation Works

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Joe Johnson worked for Harrington’s, a printing company and clocked in every Monday through Friday from 8:00 a.m. to 5:00 p.m. One Friday morning, Joe received an email from the owner of the company telling him that an all-expense paid event was scheduled for that afternoon at a recreational facility where the employees would play games, eat, and play flag football. The owner explained that the event was part of the company’s team building efforts and everyone was expected to attend. However, employees could choose to stay at work. As the team lead in his department, Joe felt pressured to attend the event and to encourage all the team members to do the same. 

While the employees were eating, Harrington’s owner assigned the employees to teams and gave them all a pep talk about the importance of working as a team. He stressed that he loved winners and wanted then to show him their best efforts. Prizes were going to be awarded for the winning teams. While running for a touchdown, Joe tripped and fell, injuring his right side. Despite his injury, Joe remained at the event until 5:00 p.m. and received his normal pay for the day. He went to the hospital on the way home from work where they found a rib fracture and a punctured lung. Because Joe was off work for a few weeks after a surgery, he exhausted his sick time and vacation time. 

Joe filed a workers’ compensation claim, which the employer and the insurance company contested because Joe’s injury did not arise out of or in the course of his employment. Based on what you know about workers’ compensation, would you agree that Joe was not entitled to workers’ compensation benefits? 

Workers’ Compensation in Action 

Today, under a statutory (written law) system, workers’ receive compensation for job-related injuries without having to challenge an employer, and regardless of whether or not the employer was at fault. Statutory workers’ compensation benefits are the exclusive remedy for many types of work-related injuries, but they guarantee that benefits will be paid. It took a major shift in social priorities and public policies to bring about the change. 

In Joe Johnson’s case, an administrative law judge (ALJ) heard the case and found that Joe felt pressured to attend the event even though attendance at the employer-sponsored event was not mandatory. The claim was compensable and Joe was awarded benefits for a work disability. 

Workers’ compensation covers both injuries that are specific as to time and place as well as injuries that occur over a period of time. Injuries that occur because of doing the same type of work over and over and causing strain on the body parts involved are called cumulative trauma. Cumulative trauma is often the result of repetitive work that over time results in injuries, especially back injuries and wrist injuries such as carpal tunnel syndrome. 

Want to know more about worker’s compensation insurance? Click here to view our Workers’ Compensation Insurance continuing education classes.

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Why Your Clients Need E&O Insurance

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As an insurance agent or broker, you’ll find fresh evidence of the expanding nature of professional liability by glancing at almost any daily newspaper. People sue attorneys, accountants, engineers, architects, trust officers, insurance professionals, real estate agents, police officers and—last but certainly not least—hospitals, nursing homes, and all manner of physicians and health care professionals, seeking untold sums of money on the grounds that the defendant has breached some duty in the practice of his or her profession.

At one time, people didn’t sue attorneys, accountants, and other professionals very often and—when they did—they found it hard to win their cases. However, these days no lawyer, accountant, engineer, architect, trust officer, insurance professional, real estate agent. or health care professional would dream of doing business without professional liability coverage. The risks are just too great and it doesn’t matter how keenly the individual may feel that old sense of responsibility that is part of being a professional. The threat of litigation touches everyone who engages in commerce.

Errors and Omissions (E&O) Insurance

Errors and omissions (E&O) is the insurance that covers a professional services provider (or that person’s partners or firm) in the event that a client holds the provider responsible for services that did not have the expected or promised results. By not purchasing E&O, a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. (Note: For medical doctors, dentists, chiropractors, etc., this insurance is often called malpractice insurance. For lawyers, accountants, architects, or engineers, it may be called professional liability.)

Under an E&O policy, the insurance company will pay the insured’s legal for defending against liability actions taken by third parties and settlements or judgments (up to the stated limits of the policy).

A person or a company in the business of providing a service to clients for a fee needs E&O insurance, which is typically customized to meet specific needs of a business or industry. For example, a printer has different risks than an electrician does in a standard business day. Both have the need for liability insurance, yet each needs a completely different type of coverage. Clients must consider what will happen if a service is not done correctly or on time, and it costs your client money or harms their reputation. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.

As an effective broker or agent, you can help your clients by identifying, analyzing, and quantifying the risks they face, and explaining the options in the clearest possible way. That being done, you can arrange am E&O policy with a bearable deductible and an intelligent limit—and assist your clients in controlling the risks that remain.

Want to know more about E&O insurance? Check out [add hyperlink to Advanced Thinking About E&O Insurance] our E&O insurance continuing education classes.

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Why Your Clients Need Cyber Risk Insurance

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Cyber crime is the fastest growing crime in the world. Criminals are exploiting the speed, convenience, and anonymity of the Internet to commit a diverse range of criminal activities. Common types of cyber crime include hacking, online scams and fraud, identity theft, attacks on computer systems, and illegal or prohibited online content.

New technology allows hackers to be even more anonymous and more dangerous when attacking computers, networks, or websites. Hackers understand the intense complexity of the World Wide Web, which changes every day. They know the weaknesses of the common browsers, programming languages, and operating systems. Modern cyber criminals might pretend to be a government agency, bank, or trusted friend in order to gain access to personal information.

According to Lloyd’s of London, cyber crime costs businesses up to $400 billion annually. As cyber crime increases, corporations, government agencies, and other entities will increase spending to defend and protect their digital networks and assets.

Cyber Insurance

Specialized cyber insurance policies have been developed by insurers to help businesses and individuals protect themselves from an ever-evolving range of risks. Recent market intelligence suggests that the types of specialized cyber coverage being offered by insurers are expanding in response to this fast-growing market need. As an insurance agent or broker, you should educate yourself about cyber insurance to assess the best coverage fit for your clients’ exposure. And all of your clients will have some exposure.

Cyber insurance is an insurance product used to protect businesses and individual users from Internet-based risks, and more generally from risks relating to information technology infrastructure and activities. Risks of this nature are typically excluded from traditional commercial general liability policies or at least are not specifically defined in traditional insurance products.

Most notably, cyber insurance policies cover a business’ liability for a data breach in which the firm’s customers’ personal information, such as Social Security or credit card numbers, is exposed or stolen by a hacker or other criminal who has gained access to the firm’s electronic network. The policies cover a variety of expenses associated with data breaches, including: notification costs, credit monitoring, costs to defend claims by state regulators, fines and penalties, and loss resulting from identity theft.

Specialized cyber risk coverage is available primarily as a stand-alone policy. Each policy is tailored to the specific needs of a company, depending on the technology being used and the level of risk involved. Policies may cover liability arising from website media content, as well as property exposures from: (a) business interruption, (b) data loss/destruction, (c) computer fraud, (d) funds transfer loss, and (e) cyber extortion. Depending on the individual policy, specialized cyber risk coverage can apply to both internally and externally launched cyber attacks, as well as to viruses that are specifically targeted against the insured or widely distributed across the Internet.

Want to know more about cyber risk insurance? Check out our cyber risk insurance continuing education classes.

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Musicians Investing in Terrorism Insurance Following Vegas Attack


There’s been a high demand for terrorism insurance in the wake of the Las Vegas massacre — with artists from all music genres reportedly looking to invest in policies for their concerts.

“Now more than ever they are targets,” explained Steves Rodriguez, business manager for the all-girl pop group, Fifth Harmony.

Speaking to The Hollywood Reporter this week, he and other managers described how musicians were taking out terrorism insurance policies now — more than ever before — following the deadly mass shooting at the Route 91 Harvest festival on Oct. 1.
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