Alyssa Lane
Auto insurance is designed to protect you from financial losses in the event of a car accident, theft, or other emergencies. However, it's important to understand that auto insurance policies have limitations and may not cover everything. When auto insurance doesn't cover everything, it can leave you vulnerable to unexpected costs and financial strain. This happens when certain exclusions or limitations are outlined in the policy, and it's crucial to be aware of these before purchasing insurance.
| Characteristics | Values |
|---|---|
| General wear and tear | Not covered |
| Mechanical failure | Not covered |
| Rental car reimbursement | Not covered |
| Roadside assistance | Not covered |
| Personal belongings | Not covered |
| Car's purchase price | Not covered |
| Aftermarket customizations | Not covered |
| Driving for business | Not covered |
| Driving in Mexico | Not covered |
| Big bills caused by uninsured and underinsured motorists | Not covered |
| Flashy rims, premium sound systems, and other aftermarket add-ons | Not covered |
| Drivers who live with you but don't appear on the policy | Not covered |
What You'll Learn
Wear and tear
Insurers are designed to cover unexpected or unforeseen circumstances, and wear and tear is usually listed as an exclusion in insurance contracts. This exclusion allows insurance companies to deny certain claims related to the replacement of parts that have deteriorated over time. If insurance policies did cover wear and tear, premiums would be significantly higher as every insured vehicle would eventually require such claims.
However, it is important to note that comprehensive and collision coverage can help cover physical damage to your vehicle resulting from accidents, natural disasters, vandalism, or theft. Additionally, if your vehicle is still under warranty, the contract may include provisions for maintenance and upkeep, which could help cover some wear and tear expenses.
If you are concerned about the costs of wear and tear, you can consider self-insuring by setting aside money each month in an emergency fund specifically for vehicle maintenance.
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Mechanical failure
There are a few options for coverage in the event of mechanical failure. One option is to purchase mechanical breakdown insurance (MBI) as an endorsement to your existing car insurance policy or as a standalone policy. MBI covers the costs of select repairs to essential components of your vehicle and is usually purchased from an insurance company. Another option is to purchase a warranty for your vehicle, which covers repairs or replacement of specific systems or parts. A third option is to add a policy rider for reimbursement for a rental car while your vehicle is being repaired. This rider typically only covers situations where your vehicle is unusable due to a covered event. Finally, some automotive clubs, car manufacturers, cellphone carriers, or credit card companies offer roadside assistance coverage, which can provide additional peace of mind in the event of a mechanical failure.
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Rental car reimbursement
To add rental reimbursement coverage to your policy, you typically need to have comprehensive and collision coverage as well. The rental reimbursement coverage will have a daily limit for rental costs, an overall rental cost limit, and a maximum number of days eligible for reimbursement. For example, a policy might offer a daily limit of $50 and a total limit of $1,500 per claim.
The cost of rental car reimbursement coverage varies by insurer, but it is generally affordable. An entire year's worth of coverage is often comparable to the cost of renting a car for just one day. You can add this coverage at any time, not just during policy renewal.
Without rental car reimbursement coverage, you may have to pay for a rental car out of pocket if your vehicle is undrivable after an accident. However, if the accident was not your fault, you can discuss your rental needs with the insurance adjuster, who can advise you on whether the claim includes rental coverage.
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Personal belongings
Auto insurance typically does not cover personal belongings in your car. This includes items stolen from your vehicle, such as your laptop or phone, or items damaged in an accident. If your car is vandalised or broken into, your auto insurance may cover the cost of repairs to the vehicle itself, but not the personal items inside.
However, some auto insurance policies may include some coverage for contents up to a certain limit, such as $500 or $1,000. It is also worth noting that some insurers will only cover items locked in the boot of a convertible or soft-top car.
If you want to ensure your personal belongings are covered, you can take out a Loss of Personal Belongings add-on cover. This is an additional protection that you can purchase with a Comprehensive Insurance or Own Damage car insurance policy, which will reimburse you for the loss or damage of personal belongings inside your car at the time of the incident.
Alternatively, your homeowners, renters, or condo insurance may cover personal belongings stolen or damaged away from the home, including in your car. These policies include personal property coverage, which covers your possessions up to specified limits, even if they are not in your home.
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Driving for business
If you're driving for business purposes, your personal auto insurance will not cover you. This is a common misconception, as many people believe that their personal insurance will cover them in the event of an accident while driving for work. However, this is not the case.
Personal auto insurance is designed for personal use, such as commuting to and from work or running personal errands. It does not cover business-related activities such as making deliveries, transporting goods or equipment, carrying paying customers, or performing a service for which you are paid.
If you are driving for commercial purposes, you need commercial auto insurance. This type of insurance is designed to protect your business from unexpected expenses in the event of an accident. It covers a range of expenses, including emergency care, damage to your vehicle, legal fees, medical bills, and lost wages. Commercial auto insurance also typically has higher liability limits than personal auto insurance, as it takes into account the riskier situations often encountered in business operations.
The cost of commercial auto insurance varies depending on factors such as the number of vehicles, vehicle type, usage, and the driving records of the employees. However, it is generally more expensive than personal auto insurance due to the higher coverage limits.
It's important to note that driving for business purposes without the appropriate commercial auto insurance is essentially the same as driving without any insurance at all. This can lead to costly consequences in the event of an accident, as you would be responsible for covering all legal, repair, and rental costs out of pocket.
Therefore, if you use your vehicle for work-related activities, it is crucial to ensure that you have the proper commercial auto insurance coverage to protect yourself and your business.
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Frequently asked questions
Auto insurance typically doesn't cover mechanical failure, general wear and tear, rental car reimbursement, roadside assistance, personal belongings, the car's purchase price, aftermarket customizations, driving for business, and driving in certain countries.
You will still be held responsible for all of the damage caused in an at-fault accident, even if you don't have enough car insurance. You can be sued for damages that went beyond your coverage limits, and the court may garnish your future earnings or auction off your personal property to pay for the damage.
If you have purchased uninsured motorist coverage, your insurance can help pay for the damage or injuries. Uninsured motorist (UM) and underinsured motorist (UIM) coverage protect you financially if you are injured in an accident that is not your fault.
Review your policy to understand what is and isn't covered. Consider purchasing additional coverage or riders to fill in any gaps in protection. You can also consult a licensed insurance agent to determine the appropriate level of liability coverage for your situation.
