Surprises happen–that’s why most states mandate insurance coverage. However, many insurance plans contain coverage gaps. While most plans utilize different exclusions depending on the policy type and coverage level, you can expect some industry-wide exclusions in almost any plan.
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What Are Auto Policy Exclusions?
Auto policy exclusions are hypothetical occurrences over which your insurance company would not provide coverage. These exclusions are typically listed in your policy documents and can vary depending on the level of coverage you choose to pay for. Some exclusions exist within all insurance plans, no matter how broad your coverage may be.
Exclusions exist among all varieties of auto insurance, including liability, collision, and comprehensive. Sometimes they occur if you inadvertently void the terms of your insurance by violating its conduct policy, sometimes leading to your policy being voided or dropped. Therefore, it is essential to know the limits of your coverage.
Why Are Car Insurance Exclusions Important?
Insurance exclusions are essential because they dictate areas where the policyholder does not have protection from peril. Imagine getting into an accident, filing a claim, then finding that the insurance you’ve been paying doesn’t cover you. While this may seem extreme, it is common for people who haven’t thoroughly read through their insurance documents. If you understand the nuances of your plan, you are less likely to see a future claim denied.
Many subgroups of coverage make up an auto insurance plan, and exclusions may incur within any of them. Listed below are the main categorical exclusions you can expect to see in any policy.
No matter what variety of auto insurance you have, companies only cover the listed circumstances in your policy. Every insurance policy comes with its own coverage limitations and nuances. Some standard coverage-based exclusions include:
Liability coverage pays other drivers for damages that you cause. However, liability coverage never covers your property and medical damages. Further, liability insurance does not cover if you damage your own vehicle or if you use your vehicle for a delivery or rideshare job.
Medical Payment Exclusions
Medical payments (MedPay) coverage is responsible for the death or bodily injury of anybody in your vehicle. Typically, MedPay exclusions are the same as liability exclusions. Additionally, MedPay coverage does not apply to an employee injured while working or to those using their vehicle as a residence.
Damage to Your Vehicle
All insurance companies won’t cover certain damages to your vehicle, even if you carry collision or comprehensive insurance. Some of these exclusions include:
- Normal wear and tear
- Tire wear
- Damage resulting from street racing
- Broken glass
- Mechanical failure
- Aftermarket electronics
- Intentional damage
Most auto insurance policies work under a permissive use basis, meaning that if you loan your car out to somebody, your plan covers them. However, some people might lower their monthly premium by omitting specific high-risk drivers in their household from that privilege (e.g., teenagers, elderly grandparents).
Family Member Exclusion
Some insurance companies won’t accept a claim involving two members of the same household. For example, if you were to crash into your spouse’s car as they were unexpectedly pulling out of the driveway, you would be restricted from pursuing legal action or an insurance payout. This scenario applies even if your spouse were at fault.
Named Driver Exclusion
The named driver exclusion specifically bars a single driver from receiving the coverage benefits of your policy should they crash while operating your vehicle. There are several reasons to exclude a driver from your plan, the foremost being to save money on your premium. Your legal or household connection to anybody with a poor driving record directly affects your rates.
Some policies may exclude coverage for vehicle damage, depending on how exactly it occurs. For example, collision insurance will not cover vandalism, and comprehensive insurance will not cover a collision. Most plans will specifically highlight what types of damages they cover and exclude coverage from anything outside of that box.
Car insurance does not cover death, injury, or vehicle damage sustained from catastrophic events like natural disasters, war, or civil unrest. However, some comprehensive insurance plans may. If you are concerned about this exclusion, inquire with your insurance agent during the application process.
Intentional Act Exclusion
Insurance policies exist to cover accidents and will not pay for any damages intentionally caused by the policyholder to their vehicle. For example, if a driver damages their vehicle with the intent to claim the insurance payout, their claim will be denied, and the insurer will notify the authorities.
Car Insurance Endorsements
One way to fill gaps in your coverage left by exclusions is by picking up car insurance endorsements. These are also commonly referred to as policy riders.
- Rideshare insurance: Rideshare coverage blends commercial insurance with personal insurance. Rideshare insurance provides wider-reaching protections for Uber and Lyft drivers, typically excluded from a standard liability plan.
- Gap insurance: If your vehicle is totaled, most policies will only pay out the current value of your vehicle. Gap insurance fills the gap caused by depreciation and reimburses you for the car’s original value.
- Roadside Assistance: Roadside assistance covers you for any roadside emergencies, such as a blown tire or if your car is broken down and needs to be towed. This endorsement is generally one of the cheaper policy rider add-ons and can be very helpful in times of need.