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Car Insurance Exclusions Are Something You Should Familiarize Yourself With

You do your research and make the calls or clicks to compare car insurance policies, finally deciding on the one you think is best. The last thing you want to be surprised with is getting into an accident and then learning about an exclusion in your policy that prevents you from getting proper coverage for any damages or injuries. Car insurance policies routinely carry some exclusions and it is in your best interest to read any policy very closely before you make a final purchasing decision.

Three standard exclusion categories

In general, you’ll find any car insurance policy exclusions coming in three major categories:

  • Legal exclusions – states regulate insurance companies and each state sets different requirements and allowances for varying forms of insurance, including car insurance. For example, some states don’t automatically allow car insurance coverage to extend to a spouse. These laws are typically passed to prevent couples from running insurance fraud, but they can have a serious impact in the case of an accident. If your spouse’s negligence causes an accident and you are injured, you may not be able to collect money from your insurance policy to cover your medical bills unless that exclusion has been specifically addressed in some fashion. Many states also require policies to exclude drivers in a family who have racked up violations of certain kinds or frequency or who have a set number of “points” against a driving record, forcing families to take out separate policies for those drivers.
  • Financial exclusions – if you are financing or leasing a car, there may be requirements and exclusions that can impact your car insurance coverage. Most financial institutions and leasing companies require that you purchase what they label full-coverage car insurance while you are leasing a car or paying off a car loan. Even a full-coverage plan does not always guarantee that your car will be paid off in full in cases of a total loss through accident or theft. If your car is totaled in a covered event, most car insurance policies only cover the wholesale price, “low book” or what some firms call the actual cash value of your car minus your deductible. That number might not cover the actual amount remaining on your loan or fulfill the terms of your lease. To protect yourself against exclusions here or to protect yourself against owing money on a car that is totaled, you may want to add an option like a loan/lease payoff option or add a Guaranteed Asset Protection (GAP) policy to your coverage.
  • Behavioral exclusions – you may have a claim denied or an incident excluded from coverage on your car insurance plan based on your behavior. One pretty standard exclusion is if you were engaged in illegal activity at the time of the incident (such as excessive speeding, driving under the influence, or even driving getaway in a robbery.) Some comprehensive coverage plans will not pay on a theft claim if you fail to file a police report in at timely manner. Some GAP coverage policies will not pay off your loan or lease if your car was stolen because you failed to take precautions such as locking your doors or removing your keys. If you are insuring a car you claim is only for family use and you are involved in a work-related accident with it, your policy may not cover it.

Exclusions through oversight

Some exclusions may be just a simple oversight, on your part or on the part of your car insurance agent. It regularly happens that people forget to list all the possible drivers who will be using a particular car. Make sure you go over all the situations when, where and how you or somebody else will be driving a car you hope to insure with your agent ahead of time, that way you can avoid a nasty surprise.

You’d certainly hate to go month after month, dutifully paying your car insurance premium, only to have it come up short exactly when you need it. Make yourself aware of any exclusions to your car insurance coverage because this is one place where what you don’t know can hurt you.

Featured images:
  • License: Royalty Free or iStock source: Image courtesy of IRC

Jeffrey Davidson is a writer and consultant with more than 25 years of experience in the insurance industry, working with lines ranging from personal, business and property-casualty. He currently writes on insurance and related topics for Reply!. You can find his other article on more questions you should be asking about car insurance.

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