If you’re like most people, you may find insurance complex and confusing. Take auto insurance, for example. You may assume that every type of loss is covered under your policy, but that is not the case. If it were, the cost of coverage would be too high for most people to afford.
For this reason, certain losses and situations are not covered – these are known as exclusions. Exclusions can be found throughout your auto policy. Most basic policies are divided into four sections:
- Bodily injury liability
- Personal injury protection (or medical payments)
- Property damage liability
- Uninsured/underinsured motorist
Each section has a number of exclusions, many of which are the same. And each is priced separately to add transparency to what you’re buying and scalability should you want to add more.
Here are seven common exclusions found in an auto insurance policy:
- Using a vehicle without permission. One important exclusion that is applicable to all policy sections is that you cannot use another person’s vehicle without permission. Why? Because this can be ruled as theft, and a policy won’t hold up in cases of auto theft.
- Transporting people and goods. Another exclusion that appears in all sections of an auto policy is the use of a vehicle to transport people or goods for hire – known as livery conveyance. This includes serving as a rideshare driver, taxi or limousine chauffeur and applies whether or not there is a passenger in the vehicle. The reason for the exclusion is that operating a vehicle for these purposes increases your chance of an accident due to the additional time and miles on the road.
- Acts of nature. Damage to your car from hail or from a fallen tree are considered acts of nature and are not covered by an auto insurance policy unless you have comprehensive coverage.
- Racing autos. This exclusion applies to losses to covered or non-owned autos that are located inside a racing facility for the purpose of participating, competing, practicing or preparing for racing or driver skill training. Because racing is considered a high-risk activity, it makes sense for the exclusion to apply to a personal auto policy. A personal policy is designed to provide coverage for normal use, such as commuting to work, shopping and other common activities. Interestingly, the exclusion specifies driving inside a facility only and doesn’t address street drag racing in the neighborhood. However, a police report would most likely hamper your claim settlement.
- Intentional bodily injury/property damage. This exclusion exists in the liability coverage section only. There have been circumstances where a vehicle was used like a weapon to hit another person or intentionally damage property. Deliberate actions that cause harm are not covered.
- Technology. As technology advances, vehicles are starting to operate independently of a driver. While flying vehicles may be far into the future, it is serious enough that there is an exclusion to all coverages for vehicles that are designed or can be used for flight.
- Vehicle with three or fewer wheels. An exclusion also exists in the medical payments and liability sections of an auto policy for injuries sustained while an individual who is insured is occupying a motorized vehicle with fewer than four wheels (enter motorcycle insurance). This also applies to the ownership, maintenance or use of a vehicle with fewer than four wheels or that is designed mainly for off-road use. As an example, dune buggies and some all-terrain vehicles (ATVs) have four wheels but aren’t meant to be driven on public roads as a regular means of transportation.
To avoid surprises, take time to read your auto insurance policy carefully, as providers may have different exclusions. If you need help understanding the specifics of your policy, your insurance professional is a helpful resource who can explain the fine print in simpler terms.