1. Forms
2. PP
3. PP-13-01

Form PP 13 01: Coverage For Damage To Your Auto (Customizing Equipment Coverage)

1. What the form is

The Personal Auto Policy endorsement PP 13 01, often titled "Coverage For Damage To Your Auto (Customizing Equipment Coverage)" or similarly as "Custom Equipment Coverage Endorsement," serves to modify the standard Personal Auto Policy (PP 00 01) by providing increased coverage limits for certain types of customizing equipment that have been added to a covered auto. Standard auto policies typically provide a limited amount of coverage for custom equipment, often around $1,500. This endorsement allows policyholders to schedule a higher limit of coverage for these items, ensuring they are adequately protected against loss or damage.

2. Classes of business it applies to

This endorsement is specifically for Personal Auto Policies. It applies to individuals who have added aftermarket parts or equipment to their private passenger vehicles. This is not typically used for commercial auto policies, as they have their own sets of endorsements for customized vehicles.

Real-world examples include:

• Car enthusiasts who have installed high-end stereo systems, custom speakers, and amplifiers.
• Individuals who have added custom wheels, spoilers, or body kits to their vehicles.
• Van or truck owners who have installed special carpeting, custom interiors, or additional lighting.
• Owners of vehicles modified for accessibility, such as hand controls or wheelchair lifts (though specific endorsements for mobility equipment may also exist and be more appropriate).

3. Special considerations

• Scheduled Limit: The endorsement requires the insured to declare a specific limit for the excess custom equipment coverage. This limit is the maximum amount the insurer will pay for a covered loss to the scheduled custom equipment.
• Definition of Custom Equipment: It's crucial to understand what qualifies as "custom equipment." Generally, this includes items not installed by the original manufacturer and not considered standard replacements. Examples include special carpeting, custom paintwork, upgraded stereo systems beyond factory installs, custom grilles, and spoilers. Electronic equipment that reproduces, receives, or transmits audio, visual, or data signals may have its own specific sublimits or be addressed by a separate "Excess Electronic Equipment Coverage" endorsement (like PP 03 13).
• Original Equipment Manufacturer (OEM) Parts: Replacements of OEM parts with other parts of like kind and quality are generally not considered "custom equipment" under this endorsement.
• Valuation: Losses are typically settled on an Actual Cash Value (ACV) basis, meaning the value of the equipment at the time of loss, considering depreciation. However, the policy will pay the lesser of the ACV, the amount necessary to repair or replace the property with other property of like kind and quality, or the scheduled limit.
• Exclusions: Standard policy exclusions under Part D (Coverage for Damage to Your Auto) will still apply. Additionally, certain types of equipment might be specifically excluded by the endorsement or the main policy.
• Relationship to PP 00 01: This endorsement modifies the PP 00 01 Personal Auto Policy. All other provisions of the PP 00 01 remain in effect unless specifically changed by this endorsement.
• Not a "Stated Value" Coverage: This endorsement provides a specific limit of coverage, but it's not typically a "stated value" or "agreed value" coverage where the insurer agrees to pay a pre-determined amount without regard to ACV. The limit is the most that will be paid.

4. Key information for agents and underwriters

• Risk Assessment:
  • The presence of significant custom equipment can increase the vehicle's value and potentially make it a higher theft target.
  • Underwriters will need to assess the type and value of the equipment being added. Receipts and potentially appraisals may be required for high-value customizations.
  • Consider the quality of installation. Poorly installed equipment could pose additional risks (e.g., electrical shorts from improperly wired sound systems).
• Pricing:
  • The premium for this endorsement will be based on the amount of additional coverage requested.
  • Insurers will have their own rating tables for this coverage.
• Coverage Gaps:
  • Without this endorsement, insureds are typically limited to the standard policy amount for custom equipment (e.g., $1,500). Agents should identify clients with customized vehicles and discuss the need for this additional coverage to avoid underinsurance.
  • Be clear about what is and isn't covered. For instance, while custom paint might be covered, normal wear and tear or mechanical breakdown of the custom equipment generally isn't.
  • Distinguish between "custom equipment" and "excess electronic equipment," as separate endorsements might be needed for comprehensive coverage of high-end audio/visual systems. Some policies may have a specific sublimit for electronic equipment even with the PP 13 01.
• Underwriting Guidelines:
  • Insurers may have limits on the total value of custom equipment they are willing to insure on a personal auto policy.
  • Certain modifications, especially those that significantly alter performance (e.g., some engine enhancements) or safety, might make the vehicle ineligible for coverage under a standard personal auto policy, or at least require more stringent underwriting.
  • Ensure the vehicle is primarily for personal use. Vehicles with extensive customization used for racing or business purposes would likely not qualify for this personal lines endorsement.
  • Documentation is key. Encourage clients to keep records, receipts, and photos of their custom equipment. This will be invaluable in the event of a claim.