For most of us, in fact 99.99% of us, we assume that is we buy an auto insurance policy for coverage of $100k/$300k, then we will have coverage of $100k/$300k if something happens. For 99.99% of us, we would be completely wrong. What most everyone does not realize is that there are many hidden provisions in your auto insurance policy that unilaterally work in the insurance company’s favor and are NEVER disclosed to you BEFORE you buy the policy. I will discuss a few of them below. But first, a quick question, in the 7 ½ minutes or the 15 minutes or less you took to purchase auto insurance, how many companies offered you a chance to look at the policy first? Or explain the policy to you? Likely none.
So, let’s get started on the HIDDEN policy provisions your insurance company NEVER told you about:
- Step Down Provisions
What is this? Simply put, this a provision in your policy that reduces the limits available for covering you if certain conditions are met. The best example is excerpted below:
That is buried on page 3 of 18 as subpart 10 of Part A Exclusions to Part A–Liability Policy in a Hartford Insurance Policy, right below the portion that talks about Nuclear Insurance in Canada. Easy to spot.
What this provision does is simple: If a family member is driving your car and causes a crash in which another family member is injured, the ONLY available insurance is the minimum required by the state. Remember our example of a $100k/$300k policy? Those 30 or so words above just obliterated those amounts and reduced the coverage to $25k/$50k (these are MVFRL limits in Missouri where I practice). Even though you are paying for $100k/$300k coverage, the insurance companies give themselves a discount depending on who is injured and who is driving. It is awfully considerate of them to put this in the policy, charge you the full freight for the $100k/$300k coverage, never bring it to your attention, and then give themselves a 75% discount on their coverage responsibilities when someone near and dear to you injures another family member. And they won’t be refunding your premiums for the difference between the cost of a 25/50 policy and 100/300 policy—they just keep your gift.
Why do they do this? Because they can and you don’t know any better. And they do it because they are banking on the idea that you would never personally go after a family member’s assets. So think twice about riding with mom or dad—their insurance company certainly did.
- The Uber Exclusion
Want to drive for Uber? Or Lyft? Or whatever else is out there? Go ahead. But you won’t have insurance coverage and Uber/Lyft won’t be providing it to you. Below is an excerpted portion of an example of policy language that directly affects you if you drive for hire:
What this means is simple—if you are driving your car hire (meaning someone is paying you to drive them around), then your personal auto policy will NOT apply. You need commercial coverage and it is not contained in the personal policy you bought. What does all that mean? If you are responsible for a crash while working for Uber or Lyft, you do NOT have any insurance coverage (or very limited coverage from the rideshare company) and the damages you caused will be coming directly out of your pocket.
Uber supplies umbrella coverage—coverage the acts as an umbrella over any underlying coverage you have. But if you don’t have any underlying coverage, you don’t get the umbrella. In this example as an Uber driver, your personal policy would be voided because of the Number 5 above. Therefore you would not have any underlying coverage and the umbrella never gets triggered. Uber may provide a very limited amount of coverage during trolling but it will not be anywhere near the umbrella amount.
The lesson from here is clear—Uber isn’t as clean and easy as you think and if you want to drive as an Uber driver—get COMMERCIAL coverage. There is a big dispute in St. Louis about Uber and Lyft—taxicab drivers purchase commercial coverage. Why shouldn’t Uber drivers?
I have to say, on this issue, I agree with the insurance companies. They have products and policies which are intended for commercial cars—you just need to buy them. Being an Uber/Lyft/Sidecar driver is not as quick and easy as you think. Things are being done to correct this but it will be fraught with loopholes and escapes. Examples will be huge fights over whether a driver was trolling, “logged in” or actively working at the time of a crash. Vague coverages like this only contribute to litigation and confusion.
The point of this article is to inform people that your insurance policy is not everything you are told it is by your broker or sales rep. Your insurance policy is a complicated document that is being altered all the time by your insurance company. What you thought you had last year can mean something completely different this year. In fact, with all of this Uber coverage stuff, the insurance is changing by the day.