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An insured attaches ISO PP 03 35 — Auto Loan/Lease Coverage to the PAP. The financed vehicle is totaled. The outstanding loan balance is $24,000 and the actual cash value of the vehicle at the time of loss is $18,000. Assuming no carryover from a prior loan and no excessive payments missed, how does PP 03 35 typically respond?
AIt pays the full $24,000 outstanding loan balance regardless of the vehicle's actual cash value at the time of loss
It pays the difference between the unpaid loan balance and the ACV paid under Part D, subject to limits, closing the gap
CIt pays only the remaining future loan interest charges on the financed vehicle and never reimburses any loan principal
DIt applies only when the lienholding lender, rather than the insured borrower, is listed as the named insured on the policy
Why this is the answer
PP 03 35 — Auto Loan/Lease Coverage applies after a total loss is settled under Part D. The endorsement pays the unpaid amount due on the loan/lease MINUS specified deductions: overdue or deferred payments, excessive wear/use/mileage charges, security deposits the lessor did not refund, extended warranty/credit insurance costs included in the financing, and prior-loan carryover (negative equity rolled in from a previous loan). It only applies when Part D pays a total loss. It is endorsement-specific to the financed/leased vehicle.
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