Personal Auto Policy

Example

“After purchasing her new car, Sarah obtained a personal auto policy that included comprehensive and collision coverage with a $500 deductible.”

Memory Tip

Think 'PAP' - Personal Auto Policy - like the sound a car horn makes: 'PAP PAP!'

Why It Matters

Personal auto policies are legally required in most states and protect drivers from potentially devastating financial losses from accidents. Without adequate coverage, a single accident could result in hundreds of thousands of dollars in medical bills, property damage, and legal fees that could bankrupt an individual or family.

Common Misconception

Many people believe that their personal auto policy will cover them when driving any vehicle, but most policies only cover specifically listed vehicles. Additionally, people often assume that minimum state-required coverage is sufficient, when in reality these minimums are often far too low to cover the actual costs of a serious accident.

In Practice

Consider John, who has a personal auto policy with $100,000 bodily injury liability, $300,000 property damage, and a $1,000 collision deductible. When he rear-ends another vehicle, causing $15,000 in property damage and $25,000 in medical bills, his insurance pays the full $40,000 in claims. However, when his own car suffers $8,000 in damage, he pays the $1,000 deductible and insurance covers the remaining $7,000.

Etymology

The term combines 'personal' from Latin 'personalis' meaning 'of a person' with 'auto' from Greek 'autos' meaning 'self' and 'policy' from Greek 'politeia' meaning 'administration of the state.'

Common Misspellings

Related Terms

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See Also