“At least we’re insured.” This is likely the one of the first things to go through people’s heads when they’re in an auto accident. Auto insurance can help prevent life-ruining bills and the considerable expense of repairing or even replacing a damaged vehicle. But not all insurance is created equal, and your auto insurance may not cover as much as you think. Here are a few things your car insurance doesn’t cover.
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While your car might be fully covered in case of accident or theft (depending on your coverage), one thing that’s not covered by auto insurance is any belongings that happened to be in the car at the time. Fortunately, some of those belongings might be covered under your homeowner’s or renter’s insurance (if you have it) — but you should check with your insurance provider just to make sure. In any case, the best prevention is probably not to leave your valuables in the car in the first place, if you can help it.
Drivers Not Listed on Your Policy
When it comes to coverage, here’s the bottom line: if their name is not on your insurance policy, they’re not covered when they use the vehicle. Even if they’re related to you or living with you — they’re only covered if they’re explicitly listed on the policy. So if your roommate, significant other or teenager borrows the car and gets in an accident, the insurance company may well refuse to pay out.
If you plan on making modifications to your car, no matter how small, you should know they may not be covered by your auto insurance policy. Most often, special modifications require their own specialized insurance to provide full coverage. You should also know that some modifications can violate your car’s warranty, making you financially responsible for any repairs.
Wear and Tear
It’s an unfortunate reality that your car begins to depreciate the day you drive it off the lot. It also starts getting one day closer to the end of its life cycle, as every vehicle eventually must. While your auto coverage will pay for things like collisions, accidents, thefts, and sudden damage, what they won’t cover is the natural wear and tear that comes with everyday driving. If parts begin to wear out and need to be replaced, you’re stuck with the financial responsibility, and the insurance company can’t help.
The gig economy is on the rise, and side hustles are common, especially things like ride-sharing or package delivery. What you may not know is that your car insurance may not cover your side hustle if you’re ferrying passengers, transporting packages or groceries, or even delivering pizza. If you use your car for business purposes, you’ll need to get supplemental coverage to make sure you’re taken care of in case of an accident.
Your Auto Loan
One of the unfortunate realities of getting a car loan — the loan remains even if the car is no longer usable due to an accident. If your car is properly covered, the insurance company may reimburse you for the value of the vehicle — but if you’ve been driving it for a few years, the value may have depreciated to the point where it won’t cover the loan balance.
If you’ve ever had an accident and needed to rent a car while your own vehicle was in the shop, you may already be familiar with this scenario. Depending on your insurance policy, you may or may not be entitled to reimbursement for renting a car while you wait for yours to be repaired. If not, you may have to pay out of pocket — although you can also get supplemental insurance to cover it.
Choosing the Right Auto Insurance Policy
Knowing all the things insurance won’t cover, you may be thinking about how to get the best policy you can without breaking the bank. Here are a few tips:
- Are you a high or low mileage driver? If you’re on the road often, the chances of accidents increases, making it wise to get collision and comprehensive coverage. If you’re a low-mileage, you may qualify for a lower rate. In any case, you should always compare policies to find the best rate.
- Do you live in an area that’s prone to natural disasters, like floods, earthquakes, or wildfires? If so, make sure you choose a policy that covers damage from natural disasters.
- Do you use your vehicle for business purposes? As mentioned above, personal auto insurance may not cover it, so a commercial insurance policy may be best.
- Do you drive an older car? If your vehicle is valued at around $4,000 or less, you could consider dropping collision and comprehensive coverage to reduce your monthly premium, if you’re able to pay for repairs out of pocket.