91.3% of households in the United States have access to at least one vehicle. The rate of car ownership is constantly on the rise thereby increasing the demand for car insurance. The average annual car insurance premium in the US is $1,548 with Michigan, the home of our own Motorcity, on the top of the charts with $3,096 as the average premium.
With such considerable investments going into car insurance policies, it is essential to have clarity on the coverage terms. It is even more important to know what is not covered by the car insurance policy!
Things covered under Car Insurance
Liability Coverage
Liability coverage under car insurance comes into play in the event of an accident without any fault or negligence of the car owner. It covers the cost of repairs of the vehicle and medical bills. Without liability insurance, these costs can be too huge to manage.
Personal Injury Protection
Personal injury coverage covers the medical bills of the driver and the passengers at the time of the accident. It covers these costs even if the driver is found to be at fault. It is good to have personal injury protection alongside liability coverage to have better cover and protection.
Collision Coverage
It covers the cost of repair to the car. The degree of damage to the car can vary from one case to the other. In certain cases, the cost of repair/replacement can be more than the market value of the vehicle. The inclusion of this coverage is usually in line with the age of the car.
Comprehensive Coverage
This coverage includes damage from all the possible risk factors to the car, driver, passengers, and third parties. It includes protection in case of a natural disaster, fire, or theft. Nowadays, several automated anti-theft devices are available in the market. The installation of such devices in the car can bring down the cost of comprehensive coverage premiums.
Uninsured and Underinsured Motorist Protection
This coverage and protection can cover the damage resulting from an accident by an uninsured/underinsured driver. These may come separately in a car insurance policy or maybe bundled together. Many states, such as Connecticut, Illinois, Massachusetts, New Jersey, Wisconsin, Kansas, etc. require the drivers to carry at least uninsured motorist coverage.
Damages not Covered
Damage due to Illegal Activities
A car insurance policy does not cover the damages if an accident occurs due to participation in illegal activities. Racing, for instance, is one such activity not included by any of the car insurance policies. Driving under the influence of intoxicants is also one such activity. If the driver does not have a valid license, then the policy does not cover damages. Breaking traffic laws can also lead to claim rejections given non-compliance to the legislation.
Acts of War
There are provisions to cover damages resulting from natural disasters. These can include floods, thunderstorms, earthquakes, etc. It is also applicable in the event of theft, fire, or riots.
However, the insurance policy does not apply in acts of war. Damages resulting from a nuclear attack or civil war, for instance, will not be valid.
If using Personal Vehicle for Business or Vehicle is Rented/Leased
Car owners may use their vehicles to transport business goods from one place to the other. Renting/leasing the car to another person for a certain period is also a common occurrence. The car insurance policy; however, will not cover damages if the accidents occur in any such scenarios.
Damage to non-covered parts
It is important to verify and confirm the specific parts that a car insurance policy may cover. For example, none of the policies will cover the damages to the tires from wear and tear. The cost of consumables and mechanical breakdowns are also often not covered. Engine protection may also come as an add-on in the policy. In such cases, the car insurance policy will not cover the damages to these parts.
Policy Expired/Cancelled
Renewal of the insurance policy promptly is of utmost significance to avail the benefits and coverage. If the accident occurs at a time when the insurance policy has lapsed then the coverage will not be provided.
In the End
Car insurance comes with a significant premium for the policyholders. The absence of insurance; however, can cause even larger damage in the event of an accident. It is essential for policyholders to carefully analyze the terms and coverage within the policy. Very often, policyholders assume a few clauses and end up having to bear the cost of the damage later. Renewal of the policy as per the applicable timeframe is also necessary. The policyholders shall also revise their policies as per the changing conditions, such as the age of the vehicle, add-ons, and likewise.