Auto Insurance: Understanding Your Policy's Exclusions And Limitations

Auto insurance is a financial safety net that covers injuries and property damage resulting from vehicular accidents. However, it's important to understand that auto insurance policies have exclusions and limitations. While specific exclusions vary across insurance providers and plans, there are several common scenarios that auto insurance typically doesn't cover.

Firstly, auto insurance policies usually don't cover general maintenance and mechanical repairs resulting from wear and tear. Oil changes, radiator issues, and routine service inspections are generally not included in auto insurance coverage.

Secondly, personal items stolen from or damaged in your vehicle are typically not covered by auto insurance. Instead, these items may be insured under homeowners or renters insurance policies.

Thirdly, pre-existing vehicle damage or regular wear-and-tear issues from previous owners are generally excluded from auto insurance coverage.

Additionally, electrical wear and tear is often not covered by auto insurance unless it results from an accident covered by your policy.

Furthermore, intentional damage caused by the policyholder is typically excluded from auto insurance coverage. However, comprehensive coverage may include protection against intentional vandalism committed by someone else.

Lastly, exceeding your policy limits can result in uncovered expenses. If the costs of an accident surpass your liability coverage limits, you may be responsible for paying the difference.

It's important to carefully review your auto insurance policy to understand its specific exclusions and limitations.

Personal items and belongings

Auto insurance typically does not cover the theft of personal belongings from your vehicle. If you're concerned about having your valuables stolen, renters, homeowners, or condo insurance may cover items outside of installed car parts.

Some auto insurance policies may include some coverage for contents up to a certain limit, such as $500 or $1,000. Most comprehensive car policies include personal belongings cover as standard. Third-party, fire and theft, and third-party-only policies are less likely to cover personal items.

If you have a convertible or soft-top car, your insurer might only cover items locked in your boot. Most car insurers won't pay out if they can prove your items were left in plain sight, as this makes criminals more likely to break into your car.

If you have expensive items in your car, it may be worth taking out a specialist mobile or gadget insurance policy.

Wear and tear

Some car insurance policies will specifically exclude wear and tear using a "wear and tear exclusion". This provision states that the ordinary deterioration of your vehicle is expected and not covered by the insurance policy. This exclusion allows insurance companies to deny certain claims, such as for the replacement of brake pads or timing belts, as these items will eventually need to be replaced in every vehicle.

The wear and tear exclusion clause is generally extensive and can be found in both home and auto insurance policies. It is important to note that while car insurance may not cover rust, tires, and other wear-and-tear items, comprehensive and collision coverage can help cover physical damage to your vehicle from accidents, natural disasters, vandalism, and theft.

Mechanical breakdowns and repairs

However, you can purchase mechanical breakdown insurance (MBI) as an optional add-on to your auto insurance policy. MBI covers repairs to your vehicle's essential components in the event of a mechanical breakdown, similar to an extended car warranty. This type of insurance can provide an extra layer of protection and help you pay less out-of-pocket for unexpected car repairs.

MBI is available for new or leased cars that are typically less than 15 months old and have less than 15,000 miles on the odometer. The cost of MBI ranges from $30 to $100 per year on average, and you can usually choose a deductible that fits your budget.

It is important to note that MBI does not cover routine maintenance, such as oil changes, tire rotations, or brake pad replacements. Wear and tear on parts like belts, hoses, and brakes are also generally excluded from coverage.

Driving for business

If you're using your vehicle for business purposes, it's important to know that your personal auto insurance policy will not cover you in the event of an accident. This is because insurance companies view business drivers as a greater risk than personal drivers, owing to the fact that they are on the road more often. As such, most states require small business owners with company-owned vehicles to take out a commercial auto insurance policy.

If you only occasionally drive your personal vehicle for work purposes, your personal insurance carrier may be able to tailor your policy to accommodate this. However, if you drive for work on a regular basis, you should consider taking out commercial auto insurance or hired and non-owned auto insurance (HNOA).

Commercial auto insurance is typically required by state law and can be purchased as auto liability coverage only, or with collision or comprehensive coverage. It covers any of your employees who have your permission to use the company vehicle. It is required for businesses that have vehicles titled to the company and employees that drive to job sites, as well as businesses that transport work equipment or employees and clients via company-owned vehicles.

HNOA covers the costs of a lawsuit over an accident you or your employee caused while driving a personal, rented, or leased vehicle for business. This includes employees who use their own cars to run work-related errands or rent cars for business trips. It covers third-party liability costs, such as damage to another vehicle, other third-party property damage, and bodily injury to other parties involved in the accident.

If you're unsure about what type of cover you need, it's best to speak to your insurance company directly.

Intentional damage

Auto insurance policies typically do not cover intentional damage, which is damage caused on purpose. This type of exclusion falls under the "'intentional act' exception", which helps insurance companies reduce the risk of fraud and save money. If a driver intentionally causes an accident, such as in cases of road rage, their insurance company may not have to pay for the damages under this exception.

However, victims of such intentional acts can still pursue compensation through their own insurance policies, such as Personal Injury Protection (PIP) or medical payments coverage, or by taking direct legal action against the at-fault driver.

While intentional damage is not covered, comprehensive coverage on auto insurance policies can provide protection against vandalism, which is considered intentional damage caused by someone else. Vandalism can include slashed tires, broken windows, dents, and defacing of the vehicle.

Frequently asked questions