Tips for car insurance in 2016

There are lots of ways to use mobile technology that involve thinking outside the box -- such as using or driving for Uber, renting a car by the hour, or renting out your car to others. In this case, the "box" happens to be your personal car insurance.

If you're involved in any of these creative uses of automobiles, discover the limitations and exclusions you will face and my suggestions for protecting yourself.

 

2 coverage gaps with TNCs

Transportation network companies, or TNCs, recruit drivers who use their own car for a fee. Drivers for companies such as Uber and Lyft pick up passengers and deliver them on demand, all arranged through the TNC's mobile app.

Unfortunately, personal car insurance almost universally excludes all coverage, including when the car is carrying a passenger and when the driver is looking for passengers. This exclusion applies to liability, uninsured/underinsured motorists and collision coverage.

If you're a driver for a TNC, such as Uber, be aware you are not insured by your personal auto insurance or your umbrella policy, from the time you log in as an available driver until the moment you log out. So if your $30,000 Toyota gets crushed in a car accident, the cost to repair is yours to bear alone.

The reason? Your personal and umbrella policies exclude coverage when using your vehicle to haul people for a fee. A few car insurance companies are starting to develop endorsements for personal auto policies that, for an additional premium, will waive this exclusion. However, until these endorsements are also available on umbrella policies, I recommend you avoid the risk.

TNCs usually insure themselves and drivers for $1 million in liability coverage but only when actually hauling a passenger. When trolling for rides, there is no coverage at all. Some states such as Minnesota have passed a law requiring TNCs to insure the driver during the trolling period, but the required insurance limits are minimal.

2 coverage gaps with rental cars

If you have a personal auto insurance policy, your liability, medical and uninsured/underinsured motorists coverage will transfer to a rental car in the U.S. or Canada. If you have an umbrella policy, liability coverage also will usually transfer to a rental abroad.

What about your liability for damage to the rental car itself?

If you have collision and comprehensive coverage on at least 1 of your vehicles on your personal car insurance, that will transfer and cover the rental car as well, but not necessarily for every expense you're liable for in the rental contract.

For example, collision coverage will not cover your responsibility for diminished value claims. If you are driving a $30,000 rental car and cause $5,000 worth of damage, your collision coverage will pay for that, subject to your deductible. But it won't cover the resale value of the car that has dropped.

Diminished value claims happen when the market value of a car that has been in previous accidents is far less than it would have been if it were accident-free. The rental company offers a solution called collision damage waiver, or CDW, that covers all your renter obligations, but that too has a few coverage gaps.

For example, there's no coverage if you had a single drink. There's no coverage if you drive carelessly. There's no coverage if you drive on an unpaved road. There's no coverage if an unlisted driver causes the accident.

If you want coverage for diminished value claims or if you don't have a car with collision coverage that would transfer to a rental, buy the CDW coverage from the rental company. Just be aware that there are some exclusions in that coverage.

Since the collision coverage on your car won't apply outside the U.S. and Canada, be sure to buy the collision damage waiver when renting cars abroad. And if you don't have an umbrella policy that covers car rentals abroad, buy the optional liability coverage as well.

2 coverage gaps with car sharing

This goes under the category "What will they think of next?"

Your car is not on the road 24 hours per day. You would like to rent it out for part of the time that it's sitting idle.

The problem is that you have no idea what kind of driver you're renting to, and neither does your insurance company. And if the insurance company finds out what you're doing, it will cancel the policy immediately.

There are 2 problem areas. First, if the renter causes an at-fault accident, you will be named in the lawsuit as the car owner.

Second, if your renter is also injured, he or she can bring a claim against you for your liability as the owner of the car who didn't have perfect tires, perfect brakes, etc. If your liability coverage won't apply, neither will your collision coverage. Car-sharing is a bad idea; there's way too much risk. Avoid this.

1 coverage gap with non-owned autos available for regular use

Your use of these autos simply is not covered by your personal car insurance. The key word is "available." This exclusion applies even if the car isn't used that much.

Here's a classic example. You have a newly licensed 16-year-old son, Joe. Grandpa Bill, who's giving up his driving privileges, has a 1998 Buick sedan that he is willing to let Joe use for a while. He will keep the car insured at the same liability limits he's always had -- $50,000 per person and $100,000 per accident for injuries.

Six months later, Joe causes a serious accident with injuries. Because the injuries have an economic value that far exceeds $50,000 per person, Joe's dad files a claim with his auto insurance company with which he has $500,000 of additional coverage per person.

Unfortunately, because Grandpa Bill's Buick was available for the family's regular use, Joe and his family can get no coverage from the family auto policy. If you're in a situation like this, rather than amending the family policy and Grandpa's policy, protect Grandpa and the family by transferring the title to the family as soon as the car becomes available for regular use.

That way, when Joe has his accident, Grandpa Bill is no longer the owner and no longer has any liability exposure. This injury claim will be covered in full up to $500,000 per person because the car is now listed as an owned automobile on the family policy.

There you have it. A plethora of potential insurance gaps arising from creative new Web-based automobile products, accessed through mobile technology, combined with some old standbys as well as suggestions for dealing with each.

2 coverage gaps with company cars

Suppose you're a sales representative for a major company, and one of the benefits is a company-provided car that you have for business and personal use. It's fully insured by the company's car insurance.

You've got it made in the shade, right? Not necessarily so.

Though your company is covered by the company's business auto insurance, there are 2 risks that aren't.

First, there's usually no coverage for injuries you cause to co-workers riding with you. It's a serious limitation!

Second, there's no drive-other-cars coverage when you borrow or rent other vehicles for personal use. Your employer can solve the drive-other-cars coverage problem by adding the broad form drive-other-cars coverage endorsement to the company auto insurance, naming you and any other licensed family members.

However, if you have at least 1 insured vehicle on a personal auto insurance policy, drive-other-cars coverage is automatically included. Problem solved. If you don't have a personal auto policy of your own and if your employer is unwilling to add a broad form, drive-other-cars coverage endorsement to the business auto policy, you must buy a "named, non-owner auto policy."

As for the exclusion of the company's car insurance for injured co-workers riding with you, if you have a personally owned automobile and a personal auto policy, you can add the extended, non-owned automobile coverage endorsement.

If you don't have a personal auto policy in your name, protect yourself by purchasing a named non-owner auto policy.

1 coverage gap for Zipcars

Most rental cars are rented for a day or more. This section refers to the type of car that is rented by the hour.

Cars are stashed around the city. You go online, see what is available and where, and then you book it. Zipcar provides primary liability coverage of $300,000. Whatever you carry for personal auto coverage would be in excess of that.

Zipcar also carries primary collision and comprehensive coverage, subject to reasonable deductibles.

Zipcars are a great option for people who love the city and don't want the expense, hassle or pollution of a full-time vehicle. But, if you want more than $300,000 in liability coverage and don't own at least 1 vehicle, and therefore don't have a personal auto policy, you will need to buy a named non-owner personal auto policy.