That's by design, of course. Were auto insurers to offer blanket coverage for every blunder we make behind the wheel, their business would quickly swerve off the road and into the ditch.
"A policy that covers anything that is imaginable without any exclusions would be impossible to price and equally difficult to afford," says Lynne McChristian, Florida representative for the Insurance Information Institute.
Instead,
auto insurers offer us a contract that assumes most of the risk in exchange for a commitment on our part to act responsibly. "For some of these exposures, there is some responsibility placed on the individual and that's where these exclusions come in," McChristian says.
The following is a rundown of the major potholes that may exist in your
auto policy. Because policies vary widely, check with your agent if you have questions about your coverage.
Here is problem number 1.
You may have witnessed road rage on the highway when intentional or accidental automotive damage sets off "Run Amuck Sally "-like reactions and retaliation.
What those furious motorists may not realize is that blowing your top can void your
auto insurance coverage should push come to not-so-gentle bumper nudge.
Auto policies typically exclude liability coverage for a driver who intentionally injures someone or causes damage to their vehicle or other property.
"If there is any intent, it's excluded," says Mitch Wilson of the Ohio Insurance Institute. "That's to prevent those instances where someone wants to take out a policy because they're tired of dealing with their neighbor."
McChristian agrees. "We don't want to give an incentive to insurers to give negative actions to others." she says. "You have to give the individual some responsibility."
Problem number 2
“Livery” is a creaky old Shakespearean term for the carriage trade or the voluntary transfer of people or property from one place to another, as in delivery.
I have a friend that uses her personal vehicle to transport customers around. Her company told her that she is covered by her insurance policy. I told her that she is at risk.
The problem with using your personal vehicle on a regular basis for livery is that it multiplies the risk to your
auto insurer. That's why most personal auto policies exclude all coverage -- liability, medical, and collision -- if you routinely use your vehicle to transport people or property.
"It doesn't even have to be a business; if you donate your time,
coverage still would not apply," Wilson says.
The livery exclusion doesn't apply to your commute, nor is it intended to punish car pools or the office worker who makes the occasional office lunch run. But if you're living the livery life on a regular basis, it's best to buy a commercial auto policy designed to carry that extra risk load.
"How your vehicle is used defines the kind of policy you require," says McChristian.
Problem number 3
People ask me if they can borrow my car all the time. They get upset when I say no. Most of us have borrowed a friend's car or loaned one without wondering what would happen in the event of a collision. Rest assured that it's all spelled out in your
insurance policy -- with plenty of room to deny coverage.
"In most insurance policies, coverage goes with the car, but most of them will have an exclusion if there is a loss to any non-owned auto," says McChristian. "So you wouldn't be covered unless the car's owner had coverage and you were entitled to use their vehicle."
If you borrow a car and the owner doesn't carry collision or their coverage is insufficient to cover the damage you cause while driving their
car, the other party may go after you for the difference.
Likewise, if you loan your car to a friend, your policy may: a) cover them, b) not cover them, c) cover them only if you're riding along with them or d) limit their coverage. That's something to think about before you toss your buddy your keys.
Problem number 4
If you lease or carry an auto loan and your vehicle is deemed unsalvageable or "totaled" following an
accident, your auto insurance has you covered -- almost.
When a total loss is claimed, the settlement folks typically calculate your payout based on the market value of the vehicle at the time of the crash.
Because lease holders and borrowers tend to be "upside-down" for much of the term of their
auto lease or loan, meaning they owe more than the vehicle is worth, that can leave them on the hook for the gap, or the difference between the market value and the remaining balance they owe. That gap can often be several thousand dollars on a totaled car.
Most dealerships and many auto insurance companies offer loan-lease gap coverage against this costly scenario.
"When you are looking to purchase or lease a vehicle, you really need to keep that in mind," says Wilson. "Normally, it is not a separate policy; it can be added onto the
auto policy itself."
Problem number 5
The greedy sometimes are the needy around the holidays. The great outdoors offers plenty of perils to vehicles. Bad weather can topple trees and hurl damaging debris. Wild animals can take up residence, chew through wiring and make nests in the upholstery. You might even suffer major damage if you hit a bear or deer.
2011 was a year of storms in the Harrisburg area. I have seen trees driving cars down the street and animals taking up residence in cars.
But if your policy does not include comprehensive coverage, which protects your vehicle from damage not caused by another vehicle or done by striking a stationary object such as a telephone pole, you may be completely exposed, as in uncovered, for nature-related damages.
While comprehensive coverage is usually required if you have an
auto loan or lease, it's entirely optional otherwise.
McChristian notes another advantage of comprehensive
coverage: "Acts of nature are typically covered, including flood damage," she says. "While your homeowner’s policy specifically excludes flood, comprehensive typically covers it."
Problem number 6As holiday shoppers often find out the hard way, just because you stow your booty in the back seat doesn't mean it's covered by your
auto insurance if thieves make off with the packages.
In fact, most auto policies exclude from theft coverage items that aren't part of the vehicle itself.
"Normally, if a component is built in and came with the vehicle, it's covered," says Wilson. "But if you have your own portable GPS, iPad, CDs or other personal items, those are going to be excluded under your auto policy for theft."
All may not be lost if your vehicle is broken into, however.
"You may have
coverage from your homeowners insurance for items stolen from your car," he says.
Conclusion
What to think about when creating your Auto insurance policy.
Thanks to the economic downturn, more Americans than ever are looking for ways to reduce their expenses. For many,
car insurance is one area that can represent savings, either by changing coverage on an existing policy or switching carriers entirely. Still, in some instances you may want to spend a little more to ensure you have adequate coverage.
Here are
four changes you may want to make on
your car insurance policy based on recent trends that affect auto insurance.
1. Check your annual mileage estimate on your policy. The less milage you drive to and from work, the less your car insurance will be. Change jobs and you drive less to work, tell your insurance company. They will lower your payments.
2. Keep your credit score as high as possible. The higher the credit score, the lower your car insurance payment.
3. Get adequate uninsured/underinsured motorist coverage. The number of uninsured and underinsured
drivers is on the rise, primarily due to the increase in unemployment. Unless you have uninsured/underinsured motorist coverage on your policy, you will be stuck with the repair bill on your car and potentially your medical expenses, depending on your health insurance coverage. Spend the extra money to get as much of this coverage as possible, since even a
minor fender bender in a parking lot could result in repairs that cost thousands of dollars.
4. Tread carefully if you drop collision coverage. Americans are keeping their cars longer -- another result of hard times. While an older car is generally cheaper to insure, some people consider dropping collision coverage altogether to save even more money. However, remember that a lack of collision coverage means you'll need to foot the entire repair bill for your car if you are at fault. Spending the extra money on collision coverage may be a better choice if it will be challenging to get the funds to repair or replace your car after a collision.
