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 an auto policy. Most basic auto policies are divided into three sections:
- Third party liability (mandatory)
- Collision coverage (optional)
- Comprehensive coverage (optional)
Each section has a number of exclusions, many of which are the same. Each is also priced separately to add transparency to what you’re buying and scalability should you want to add more.
Here are six 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 an individual 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. Examples of this include serving as an Uber 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 what is known as “public conveyance” increases a driver’s chances of an accident due to the additional time and kilometres on the road.
- Autos used in the auto business. Under a personal auto insurance policy, if an individual is employed or is otherwise engaged in the business of selling, servicing, storing, repairing or parking vehicles that are designed to be used on public roads, coverage is excluded. That’s because under a personal auto policy, an individual who is insured shouldn’t be repairing, selling, storing or performing other garage-related services on vehicles of others. The insured individual can work on his or her own vehicle or that of family members, but working professionally on vehicles for others is not covered. This kind of exposure requires a business auto insurance policy.
- 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 contests 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.
- 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 under the purview of insurance.
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 broker is a helpful resource who can explain the fine print in simpler terms.
