What Your Car Insurance Does Not Cover

Most drivers who dutifully take out the necessary insurance coverage drive around the highways believing that, if the worst should happen, their policy would pay out and cover any financial losses.

In reality, however, while a personal auto policy does provide a very good level of coverage, there are a number of scenarios that mean a driver could be left out of pocket and faced with the problem of how to pay for their damaged vehicle, or even worse, their medical costs.

There are two fundamental reasons why most drivers take out insurance (other than because the state forces them to): to protect their assets in case they have to pay out liability costs for damage to another person’s vehicle or medical expenses, or to cover the costs of getting their own vehicle back on the road.

When applying for insurance coverage, it can be very tempting to overlook options that will hike up the premium, and to simply go for basic coverage that will produce the lowest cost. But if the worst occurs and a claim needs to be submitted, the insurer will look closely at not only the policy exclusions but also the information provided at application time, before deciding whether to pay out.

There are a number of different scenarios which are not covered as standard under a personal auto policy, but could possibly be incorporated if disclosed at the outset.

Using your car as a means of transport for business purposes is specifically excluded by most insurers, and while most full-time drivers such as cab drivers or couriers will have business insurance, there are a number of individuals where driving for business purposes is a small part of their role. Examples include collecting goods from a warehouse, dropping off supplies to another office or customer, or even giving a client a ride, each of which would all be automatically excluded by the insurer but may not occur to the insured as being outside the policy terms. Claims assessors are experts in picking through the facts of an accident and spotting signs that the journey may have been linked to work.

In addition, if your vehicle is used for livery or used to transport paying passengers, the insurance coverage will also be automatically suspended. Insurers may view this even more dimly than the scenario above and may treat the applicant as having deliberately defrauded the company, rather than classing it as an inadvertent non-disclosure. Depending on the company involved and the state, this can have even more severe financial penalties than simply not receiving a payout.

The one exclusion to this rule that most insurers operate is for car pools. Sharing expenses between members and providing lifts in these circumstances is generally considered to be acceptable within the spirit of the contract. This allowance does not extend to employees of a business, other than domestic servants, unless they are already covered by workers compensation law.

Property within the vehicle is usually excluded from any claim too, as opting to transport expensive equipment such as a laptop is not included in the insurer’s calculations when they set their pricing structure. Household insurance is expected to be arranged to cover any goods, even while outside the home. This exclusion extends to any goods that the insured is transporting or looking after for another person.

A personal auto policy will not act as a warranty for the mechanical condition of the car and should a component break down or require replacing, the insurer is not liable. In some cases, this can lead to individuals deliberately damaging their cars in the hope they will receive a payout. However, any kind of intentional action leading to damage will automatically be excluded, leaving the individual worse off than before. In addition, if the insurer suspects the insured is not being truthful they may pursue them for submitting a fraudulent claim.

While most drivers realize that deliberately damaging their car would not be covered, many do not understand that it is not the end result that is the deciding factor but what caused it. In other words, if the driver did not intend to damage their vehicle but nevertheless still caused it by untoward behavior, the insurer will still decline the claim.

Insurers also expect their drivers to act in a responsible manner and any deviation from the norm usually results in a claim being turned down. For example, off-road activities are not a standard form of driving and any damage to either a vehicle or individual will not be covered, unless specifically agreed with the insurer at the outset. The same principle applies to any kind of racing or competition. Misdemeanors leading to damage are also likely to be excluded, such as crashes caused by drink driving or even excessive speeding.

Policy owners may believe that their coverage extends to all vehicles owned but not every type of vehicle can be covered by a standard auto insurance policy. Golf buggies and go-carts as well as boats and motorcycles all require specific contracts with an insurer to provide coverage.

However, many unpaid claims are not as a result of an irresponsible use of the vehicle or a set of unusual circumstances, but simply due to the insured trying to cut costs when taking out the policy. Many states specify a minimum level of coverage, primarily designed to protect other road users, and very often this means that the insured could end up having to pay out for their own costs. A common mistake is to cut out collision coverage as well as opting not to include uninsured motorists’ coverage, which means that no monies would be paid for either a crash or damage caused by an unidentified hit-and-run driver.

Personal auto policies do provide wide coverage but it is important to check the terms and conditions to ensure you fully understand what exclusions there are. The exact nature of what is covered and what isn’t will vary somewhat between insurers, but opting to try to cut costs in the short term, either by not taking out full coverage or by being less than truthful on your application, is likely to cost far more in the longer term.