Auto insurance classification codes are a set of numbers, also known as covered auto designation symbols, that indicate the types of vehicles insured under a business auto policy. These symbols are important because they trigger coverage for specific categories of vehicles. The ISO Business Auto Coverage Form (BACF) is a standard insurance form used by insurers to provide commercial auto coverage, and it includes 10 symbols ranging from 1 to 9 and 19, each with its own specific meaning and level of coverage. Understanding these auto insurance classification codes is crucial for businesses to ensure they have the appropriate coverage for their vehicles.
What You'll Learn
Covered auto designation symbols
The covered auto designation symbols include the numbers 1 through 9 and 19. The meanings of these symbols are explained on page 1 of the ISO Business Auto Coverage Form (BACF), which is a standard insurance form used by many insurers to provide commercial auto coverages. Of these symbols, Symbol 1 affords the broadest coverage, applying to any auto used in your business, including those that are owned by the insured or hired, as well as those owned by someone else, such as an employee. This symbol can only be used to trigger auto liability coverage and not for any other type of coverage.
The other symbols offer more specific types of coverage. For example, Symbol 2 covers all autos owned by the insured, including private passenger type autos and commercial vehicles (trucks). Symbol 3 designates private passenger autos only, while Symbol 4 triggers coverage for commercial vehicles only. Symbols 5 and 6 are used for no-fault and uninsured motorist coverage, respectively, in states where these are required by law.
Symbol 7 covers only the vehicles described in the declarations and any trailers that are not owned but attached to a car or truck listed in the declarations. Unlike the previous symbols, Symbol 7 only covers newly acquired vehicles for 30 days after the purchase date, not for the entire policy period. To extend coverage beyond 30 days, the insured must report the new vehicle to their insurer within this period and pay the applicable premium.
Symbol 8 covers hired autos, including those rented, leased, or borrowed, but not from any employees, partners, or members of their households. Symbol 9 is for non-owned autos used in the insured's business but not owned, hired, rented, leased, or borrowed. Finally, Symbol 19 is rarely needed and covers mobile equipment that is subject to a compulsory or financial responsibility law.
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Types of auto insurance coverage
Auto insurance coverage can be broadly categorized into liability coverages, vehicle coverages, coverages for yourself, and other optional coverages.
Liability Coverages
Liability coverages include bodily injury liability and property damage liability. Bodily injury liability covers the medical expenses of the other driver in an accident that you caused, while property damage liability covers the cost of repairing damage to other vehicles, fences, mailboxes, or buildings that you caused. These coverages have different limits, usually written as three numbers, such as 100/300/50, indicating the maximum coverage for each person, per accident, and for property damage.
Vehicle Coverages
Vehicle coverages include collision coverage and comprehensive coverage. Collision coverage pays for damage to your car, regardless of who was at fault, and also covers damage from hitting a pothole or an object. Comprehensive coverage pays out if your car is stolen or damaged by something other than a collision, including storms, floods, falling objects, explosions, earthquakes, vandalism, or hitting an animal. Both collision and comprehensive coverage are optional and may be limited by the value of your car, so they might not be cost-effective for older vehicles.
Coverages for Yourself
Coverages for yourself include personal injury protection (PIP) and medical payments coverage (MedPay). These cover your and your passengers' medical expenses after an accident, regardless of fault. PIP may also cover funeral costs, child care, or lost wages due to injuries.
Other Optional Coverages
Other optional coverages include emergency road service, rental reimbursement, mechanical breakdown insurance, uninsured and underinsured motorist coverages, and more. Uninsured motorist coverage pays out if you are hit by a driver without insurance, while underinsured motorist coverage protects you if the at-fault driver's insurance is insufficient.
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Commercial auto policy
Commercial auto policies are a crucial aspect of insurance, and understanding the classification codes is essential for proper coverage. Commercial vehicle usage plays a significant role in determining the appropriate business use class, which is a key factor in the rating process for commercial vehicles.
There are three primary business use classifications defined by their specific transportation purposes. The first is the 'service' classification, which encompasses vehicles used for transporting tools, equipment, and supplies to and from job sites. This classification does not include the transportation of any other property besides these work-related items.
The second classification is 'retail', which involves the transportation of property to and from individual households. This classification is relevant for businesses that deliver goods directly to customers' residences.
The third and final classification is 'commercial', which covers all other types of transportation that do not fall under the service or retail categories. This classification is applicable to a wide range of businesses that transport goods or people.
It is important to note that the business use class is just one aspect of determining the appropriate commercial auto policy. Other factors, such as vehicle characteristics, usage, and driver information, also play a significant role in tailoring the right insurance coverage for commercial vehicles.
By properly classifying commercial vehicles, insurance providers can assess the risk and provide accurate rates for businesses. This ensures that companies have the necessary protection in place for their specific operations and helps to streamline the claims process in the event of an incident. Understanding these classification codes is, therefore, a critical step in managing commercial auto risks effectively.
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No-fault auto insurance laws
No-fault insurance laws are intended to lower the cost of auto insurance by removing small claims from the courts. Each insurance company compensates its own policyholders (the first party) for the cost of minor injuries, regardless of who caused the accident. This means that the second party (the insurance company) pays the first party (the policyholder), and the third party (the other person or persons hurt as a result of the accident) receives compensation from their own insurance company.
In its strictest form, the term "no-fault" applies only to state laws that both provide for the payment of no-fault first-party benefits and restrict the right to sue. Under no-fault laws, motorists may sue for severe injuries, pain and suffering, or disability days incurred as a result of the accident, but only if the case meets certain conditions, or thresholds, relating to the severity of the injury. These thresholds may be expressed in verbal terms (a descriptive or verbal threshold) or in dollar amounts of medical bills (a monetary threshold).
Twelve states and Puerto Rico have no-fault auto insurance laws. Florida, Michigan, New Jersey, New York, and Pennsylvania have verbal thresholds, while Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah use a monetary threshold. Three states have a "choice" no-fault law, in which motorists may reject the lawsuit threshold and retain the right to sue for any auto-related injury.
While no-fault insurance can provide peace of mind that medical bills will be covered in the event of a car accident, it often comes with higher car insurance costs and an increased risk of fraud. In addition, insurance fraud tends to be more common in no-fault states, and drivers may exaggerate their injuries to get an insurance payout.
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Uninsured motorist coverage
Uninsured motorist bodily injury (UMBI) and underinsured motorist bodily injury (UIMBI) coverage can help pay medical bills for you and your passengers if you're hit by an uninsured or underinsured driver. This can include expenses related to injuries, medical treatments, and lost wages resulting from the accident. Some states may not require a deductible for UMBI/UIMBI coverage.
Uninsured Motorist Property Damage (UMPD)
UMPD coverage, on the other hand, may pay for damage to your vehicle caused by an uninsured driver. In some states, UMPD will also cover damages to your vehicle in a hit-and-run incident, while in others, you may need collision coverage for this scenario. It's important to note that UMPD coverage usually has a deductible, and the limit can be set based on the value of your vehicle.
Importance of Uninsured Motorist Coverage
Without uninsured motorist coverage, you could be financially responsible for medical bills and vehicle repairs if involved in an accident with an uninsured or underinsured driver. Even if you have health insurance, it may not cover all the expenses related to a car accident, and you might have to pay a deductible. Additionally, your health insurance may not cover lost wages or other types of damages included in UMBI/UIMBI coverage.
In summary, uninsured motorist coverage is a crucial aspect of auto insurance, providing financial protection and peace of mind in the event of an accident with an uninsured or underinsured driver. It ensures that you and your passengers are covered for medical expenses and vehicle repairs, reducing the financial burden associated with such incidents.
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Frequently asked questions
The ISO Business Auto Coverage Form (BACF) is a standard insurance form used by many insurers to provide commercial auto coverages.
The BACF utilizes a set of numbers, called covered auto designation symbols, to indicate the types of autos that are insured for each kind of coverage. The covered auto designation symbols include the numbers 1 through 9 and 19.
Each symbol triggers coverage for a specific category of vehicles. Symbol 1 affords the broadest coverage, including any auto used in your business, while Symbol 2 initiates coverage for all autos owned, including private passenger type autos and commercial vehicles. Symbol 3 designates private passenger autos only, while Symbol 4 triggers coverage for commercial vehicles only.
Symbol 5 is used to provide no-fault coverage for autos owned by the policyholder when such coverage is required by law. No-fault auto laws exist in twelve states and Puerto Rico.