If you have “full coverage” on your vehicle, you might simply assume that, no matter what happens, you’re protected in an accident, theft, or other disaster. While your car insurance will indeed cover a great number of situations, you might be surprised to learn that there are exceptions – often significant exceptions – to what is actually covered.
Car insurance laws vary from state to state, which makes it hard to give a definitive list of what isn’t covered. In addition, your particular policy may be written in such a way that certain things that wouldn’t normally be covered are indeed covered. As always, check with your insurance policy for more specifics about your individual situation.
In general, here are some things your car insurance may not cover:
- The difference between what you own and the vehicle’s worth. If your car is stolen or totaled in an accident, your insurance company is generally going to reimburse you for the book value of the vehicle. They aren’t concerned with how much you owe on the vehicle; you might owe more or less than what the vehicle is worth. If you owe more than what the vehicle is worth, you can find yourself without a vehicle and owing hundreds or even thousands of dollars to your lender. Many people choose to purchase “GAP” insurance for this purpose; GAP insurance is specifically designed to cover the disparity between what you owe and what the insurance company says the vehicle is worth.
- Uninsured motorist damage. Most states require that you purchase a certain amount of car insurance to cover damage when you’re in an accident with an uninsured driver. Some, however, do not. Even if your state requires it, the amount of the coverage might not be the same as if you were in an accident with an insured motorist. Some consumers choose to add additional uninsured motorist damage to their insurance policy.
- Medical costs. Medical costs can be a tricky one, and are one of the areas that can be very different from one state to the next. Some states require you to purchase insurance to cover bodily harm in an accident. However, other states have a system where you don’t have to purchase this additional coverage if you already have a health insurance policy that will cover injuries due to a car accident. This is where it gets tricky; not all medical insurance policies will cover injuries due to a car accident. In fact, some medical insurance policies specifically exclude those costs. It’s usually a good idea to make sure you have bodily injury coverage from one source or another.
- Loss of income. If you have an accident and you’re out of work for any amount of time, your car insurance doesn’t always cover that automatically. Generally speaking, it’s something you’ll have to add on to the policy. Without it, you could be facing several months without income.
- Towing. Towing services after an accident can be tremendously expensive and inconvenient. Generally, they’re not covered by your insurance. Some insurance policies offer you a towing or even a roadside assistance package, for example, that will cover not only towing but services such as changing a tire or jump starting your battery.
- Rental car coverage. Something else you need to consider is the need for a rental car. If you have just one vehicle and it’s your only way to work, you could shell out a significant chunk of change just to get back and forth to work. Between the cost of the rental and spiking gas prices, it might actually be cheaper to stay home. Many drivers add a rental car reimbursement rider to their auto insurance policy.
- Damage due to fault. Some states have “no-fault” insurance, where it doesn’t matter whether or not you were at fault. Other states have different rules. You may have a policy, for example, that prevents you from being covered if you’re operating a vehicle under the influence. Generally speaking these exceptions don’t include relatively minor traffic violations that could cause an accident, however. They’re normally reserved for felony driving conditions.
It’s worth taking a few minutes every couple of years to review your car insurance policy to see what it does and what it doesn’t cover. There may be types of coverage you’ll want to add, or there may even be some you’re willing to do away with in exchange for a higher degree of risk.