Auto Insurance Glossary – P Definitions
Package Policy
A single policy of insurance which combines two or more different types of coverage. For example, a personal auto policy typically comprises four principal types of coverage, namely personal liability coverage (for personal injury and property damage to others), medical payments insurance (for personal injury to yourself and any passengers), uninsured motorists coverage (for personal injury to yourself and any passengers caused by another, uninsured or underinsured motorist, or a hit-and-run driver), and damage to your auto (for collision and comprehensive coverage). Additional coverage under the same policy could include insurance for emergency road service and towing charges.
Partial Loss
Damage which is covered under an insurance policy but which does not constitute a total loss of the insured item, and which consequently is less than the maximum liability which an insurance company is subject to in respect of the insured item. For example, under an auto insurance policy any collision which results in the repair of an insured vehicle, as opposed to it being declared a total loss, is by the nature of the case a partial loss.
Peril
From an insurance perspective, the cause of an insured loss. For example, a car accident which causes bodily injury is a peril, as is theft of your car. Consequently a personal auto policy is said to provide coverage against specified perils. A peril contrasts with a hazard which is a circumstance or set of circumstances which increase the likelihood of a loss occurring, such as worn tires. It also contrasts with risk, which is the probability of occurrence of a loss.
Personal Auto Policy (PAP)
A generic term meaning a consumer auto insurance policy (as opposed to a business auto policy), but also a term which specifically refers to template insurance wording produced by the Insurance Services Office (ISO) for the use of insurance companies in drafting their personal auto insurance policies. The most recent revision of the ISO personal auto policy wording occurred in 2005 (number PP 00 01 01 05).
Personal Injury Protection (PIP)
The term given to coverage mandated by states which have adopted no-fault, first-party personal injury auto insurance laws, and by states which allow drivers to choose between the tort and no-fault systems (known as ‘choice states’) for personal injury arising from car accidents. The coverage also exists in states which do not place limitations on the ability to sue for personal injury under tort law (referred to as ‘add-on states’). Personal injury protection is wider in scope than typical medical payments insurance, as it extends coverage to rehabilitation expenses, loss of earnings and surviving spouse’s benefits.
Preferred Risk
A term given to drivers who are regarded by car insurance companies as lower risk compared to the risk presented by the average driver, and who as a consequence qualify for good driver discounts. The qualification criteria for preferred status include your driving experience, your driving record and your insurance score. Your driving experience is the most straightforward criterion, and is defined in terms of the number of consecutive years (usually three to five) during which you have held a valid driver’s license. Your driving record is measured in terms of the number of moving violations you have received in the previous three to five years, the incidence of your being at-fault in a car accident, and whether you have been convicted of driving under the influence of drugs or alcohol over the previous five to seven years.
Primary Coverage
An insurance policy which indemnifies an insured for a loss before any other policy of insurance provides indemnity for that same loss. For example, a personal auto policy provides primary coverage to consumers for personal liability for property damage arising from their use of a motor vehicle. If the limit of coverage under that policy is not sufficient to meet the obligation, then any secondary coverage, such as umbrella insurance, is activated. In some cases more than one insurance policy provides primary coverage for the same loss, such as when an insured has (inadvertently or otherwise) effected double or overlapping coverage.
Pro Rata Liability Clause
A clause in an insurance policy which specifies that, if an insured loss is covered under one or more other insurance policies, then the insurer is only liable for a pro rata share of the loss. Such a clause usually specifies that the pro rata share is calculated as the percentage which the policy’s coverage limit for that loss bears to the sum of the coverage limits of all policies which provide coverage for the loss. In a personal auto policy, a pro rata liability clause takes the form of an other insurance clause.
Proximate Cause
A legal term which refers to one of the five factors which are required to demonstrate negligence in a court of law. A proximate cause is one which immediately precedes an effect of the cause. In relation to personal liability claims arising from car accidents, a proximate cause is one which is sufficiently close to an effect so as to enable one to conclude that the cause could reasonably be expected to produce such an effect. An example of a proximate cause is driving the wrong way down a one-way street (cause) and colliding head-on into another car, causing the death of the other driver (effect). Causes which are not proximate generally consist of multiple events between the cause and the effect. For example, braking suddenly (cause) to avoid hitting a child who has wandered onto the street, which then causes a following car to swerve, mount the sidewalk and to then hit and injure a pedestrian (effect) is not proximate cause in a legal sense. The driver who braked suddenly could not have reasonably foreseen the effect, and would not therefore be negligent with respect to the pedestrian’s injuries.
