5 Key PAP Eligibility Questions

1. What are the primary eligibility requirements for a Personal Auto Policy (PAP)?

Before discussing WHO is eligible for a personal auto policy, agents must understand the required WHAT of PAP eligibility. The three primary eligibility requirements are:

• The ownership or long-term lease (six months or greater) of up to 4 “private passenger autos;”
• Written on a specified auto basis (meaning each must be listed); and
• Owned by:
  • An individual;
  • Husband and wife who are residents of the same household; or
  • Owned by a Trust if PP 13 03 is attached.

 

Notice a few key limitations in these requirements. The insured can’t own more than four vehicles and ownership is limited to the named insured or jointly by the named insured and spouse.

There are endorsements that can expand these eligibility requirements.

 

2. Can a PAP be written if multiple individuals other than spouses jointly own a vehicle?

Yes, when the PP 03 34 is attached, a PAP can be written on a vehicle owned by unmarried individuals. However, specific requirements must still be met:

• If the joint owners are not related, they must live in the same household;
• If the joint owners are related, they are not required to reside together (non-resident relatives).

This endorsement allows a PAP to the written even when:

• Unmarried individuals living together jointly own a vehicle; and
• A parent and child jointly own a vehicle (regardless where each lives)

 

3. If a child owns a vehicle in his/her name, can or should their vehicle be listed on the parent’s PAP?

Technically – NO! Look again at the eligibility requirements. To be eligible for a PAP, the vehicle must be owned by the named individual or jointly by spouses. And if the PP 03 34 is attached, one of the owners must still be a named insured.

Because the child is not a named insured on the policy, his/her auto cannot technically be included as an auto on the PAP. The child must have a separate PAP if the vehicle is owned solely by him or her.

But if the vehicle is listed on the policy, there may still be coverage. Here is relevant policy language contained in the parent’s policy that must be considered:

B. We do not provide Liability Coverage for the ownership, maintenance or use of:

3. Any vehicle, other than “your covered auto”, which is:

a. Owned by any “family member” or

b. Furnished or available for the regular use of any “family member”.

However, this exclusion (B.3.) does not apply to you while you are maintaining or “occupying” any vehicle which is:

(1) Owned by a “family member” or

(2) Furnished or available for the regular use of a “family member”.

Vehicles listed on the policy qualify as a “your covered auto” even if it is not owned by the you because the policy partially defines a “your covered auto” to mean one that is listed in the declaration. So, by default, the vehicle owned by the child appears to qualify as a “your covered auto.”

Although there may be coverage, this is in violation of all eligibility rules. And for this to get past the underwriter (or the underwriting system), the agent would have to incorrectly (or fraudulently) answer the application question, “WITH THE EXCEPTION OF ANY ENCUMBRANCES, ARE ANY VEHICLES FOR WHICH INSURANCE IS REQUESTED NOT SOLELY OWNED BY AND REGISTERED TO THE APPLICANT?”

Don’t assume the answer for the insured, the question must be asked. Once it is discovered that the named insured (individually or jointly) does not have an ownership interest in the vehicle, a separate policy must be written.

 

4. What type of vehicles are eligible for coverage in a Personal Auto Policy?

According to the rules, only private passenger autos are eligible for a PAP. A private passenger auto is a four wheel motor vehicle, other than a truck type, owned or leased under contract for a continuous period of at least six months, and

1. Not used as a public or livery conveyance for passengers,
2. Not rented to others.

 

But what about trucks and truck types? The rules further state:

2. A motor vehicle that is a pickup or van shall be considered a private passenger auto, if it:

1. Has a Gross Vehicle Weight Rating of 10,000 lbs. or less, or is a vehicle with a Gross Vehicle Weight Rating greater than 10,000 lbs. for which a symbol is displayed in the Symbol and Identification Manual; and (which means both conditions must be met)
2. Is not used for the delivery or transportation of goods or materials unless such use is:

(1) Incidental to the insured’s business of installing, maintaining or repairing furnishings or equipment, or

(2) For farming or ranching.

A pickup or van used in the business of the United States Government, by an employee of the Government, shall be considered a private passenger auto only if:

1. It meets the conditions in a. and b. above; and
2. Coverage is limited in accordance with the federal employees using autos in government business endorsement.

There is also a PAP rule applicable to farm vehicles. This rule states:

3. A motor vehicle owned by a farm family co-partnership, or farm family corporation shall be considered a private passenger auto owned by two or more relatives who are residents of the same household if:

1. It is principally garaged on a farm or ranch, and
2. It otherwise meets the definitions in 1. and 2. above

 

5. Can vehicles other than private passenger autos be included in a PAP?

Yes, a PAP can also be provided for motorcycles, motor homes, golf carts or other similar types of vehicles and snowmobiles. However, policy language often precludes some of these types of vehicles:

B. We do not provide Liability Coverage for the ownership, maintenance or use of:

1. Any vehicle which:

a. Has fewer than four wheels; or

b. Is designed mainly for use off public roads

To overcome this exclusion, the PP 03 23 Miscellaneous Type Vehicle Endorsement must be attached. The endorsement allows the insured to list the vehicles to be covered and defines what qualifies as a “miscellaneous type vehicle”

A. For the purpose of the coverage provided by this endorsement “miscellaneous type vehicle” means a motor home, motorcycle or other similar type vehicle, all-terrain vehicle, dune buggy or golf cart.

 

Last Updated: June 19, 2023