Are your custom car parts covered by your insurance policy? (image via Beaulieu_Hants on Flickr)

You have a sweet ride.  You have spent a lot of money making it as unique as you are including a custom paint job, an aftermarket exhaust, and custom alloy wheels with chrome rims.   You installed a hi-end stereo system with subwoofer, amp, and speakers.  You park your car in the same place every day while you are at work.  You just left work and are heading across the parking lot to your space.  At first, you are merely confused to find some other car in your spot.  But as minutes tick by and you look around for your car, confused, understanding settles over you.  You had a sweet ride.  Now, someone else is driving it.

This is not the moment that you want to find out that all those custom parts aren’t covered by your auto insurance policy.  Unfortunately for you, that is most likely what you will find out when the auto adjuster meets with you to talk about your car.   Standard policies do not generally cover add-ons and upgrades like custom wheels and special speakers.  This means that any loss to your vehicle that damages these parts won’t be covered by your insurance company.

How to Determine What is Covered and What is Not

The best way to figure out what your auto policy covers is to read the entire policy that was provided with your policy when you bought it.  Your auto policy usually comes with at least two standard pieces, the Dec Page (Declaration Page) and the full policy document.  Each year at renewal, your insurance company likely sends you a new Dec Page which lists start and end dates, limits, coverage’s, and deductibles.  Most insurance companies do not provide the full policy document at renewal unless it has fundamentally changed.  If you have had your policy for several years, it is likely a good idea to call the insurance company and request a new copy.  This saves you from having to dig through old paperwork to find it and also ensures you have the most up to date version.

The policy document outlines every detail about your policy and includes what it covered and what is excluded.  Most insurance companies have a standard policy form that they use for all policies.  Unless you requested additional coverage’s or different limits, it is likely that your policy follows this standard form.

You can also discuss your policy with your agent and ask them to walk you through your policy and explain what is covered and what is not.

How to Cover Your Customizations

Once you understand what is covered, you can talk to your insurance agent about how to get your custom parts and features covered.  The extra coverage you need and which insurance company you use will determine how the additional items you need to insure will be covered.  You may need to schedule the items, which will add them as covered items to your original policy.  You may need to purchase a rider which adds additional coverage to your policy to provide coverage for your custom items.  You may also need to buy a separate policy in order to secure the coverage you need.  You agent can assist you in determining the best way to meet your needs.

Don’t wait until the worst happens to determine if your custom car has the coverage you need.  Check your policy and talk to an agent today.

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Commercial Auto Policy

Does your job constitute your needing a Commercial Auto Policy? (Image via Can ‘o’ Rye on Flickr)

Do you need a Commercial Auto Policy? This is a question many small business owners ask themselves, their friends, and hopefully their insurance agents.  There is a common misconception that your personal auto policy will cover any losses incurred while driving for the business if you are driving your personal automobile which is covered under your personal auto policy.  This makes a certain kind of sense on the surface.  In essence, you are buying two insurance policies to cover the same exact circumstance, you, driving your car.

Commercial vs. Personal

The main difference between the two types of coverage is how you are using the car.  If you are only using it to drive your family around or to commute to your job, you only need a personal auto policy.  This is true in almost every case, although there are some circumstances where the type of vehicle you own may require you to purchase a commercial auto policy regardless of whether or not you are using it for commercial purposes.  If, however, you are using your vehicle for business activities, you likely need some type of commercial coverage since the majority of personal auto policies exclude losses resulting from business activity.

What Constitutes Business Activity?

This can be a complex question, especially for small business owners.  If you drive your son to school on the way to an appointment with a client, it isn’t always clear which part of the trip is business from an insurance coverage perspective.  The best way to understand what is business activity and what is not is to ask your insurance agent.  If in doubt, assume that anything related to your business requires commercial coverage.

There are some things you can ask yourself that may help you determine if the driving you do would fall under commercial or business activity.

  • Do you deliver anything to customers or clients using your car?  Things like pizza, newspapers, Avon, or any other product that you put in your car and then transport for delivery can be considered commercial activity.
  • Who is driving the vehicle?  If you allow employees or contract workers to drive the car for business purposes, this won’t usually be covered by your personal policy.  Even if you are the only driver, there is a good chance that commercial coverage will be required.
  • Who is riding in the vehicle? If you are using the vehicle to transport other people and getting paid for it, you absolutely need commercial coverage.
  • What percentage of use is personal and what percentage is commercial?  Although this doesn’t always factor into coverage determinations, some insurance companies require commercial coverage if the vehicle is being used primarily for business use.  Check with your agent to see if this applies to your coverage.

The bottom line is that most small businesses cannot afford to take the chance that they have an accident or become liable for damage caused by their car that their personal auto policy carrier refuses to cover.  If there is a question in your mind about whether or not you need to purchase a commercial auto policy, the odds are that you do and you should contact your insurance agent as soon as possible.

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Are you adequately insured?

Every time you get behind the wheel, you run the risk of colliding with one of the millions of drivers that don’t have car insurance.  According to the Insurance Research Council one in seven U.S. drivers is on the road without insurance despite the fact that almost every state requires drivers to carry a minimum level of coverage.  The best way to protect yourself from these uninsured drivers is to make sure you have the right amount of insurance.

But how much insurance do you really need?

 

In order to answer that question, you need to understand what the different types of coverage are and how they protect you.

Liability coverage is usually the first listed on your policy and covers losses incurred by other people because of your negligence.  Your liability limits are listed as three numbers separated by slashes like 100/300/100. The first two numbers are your bodily injury liability coverage limits.  Bodily Injury Liability pays for the medical expenses of others who are injured in an accident that is determined to be your fault.  The first number is the limit for a single person’s medical expenses, a 100 indicates that the maximum the insurance company will pay for one person’s medical expenses is $100,000.  The second number is the total amount the insurance company will pay for all medical expenses for the occupants of the other car, so a 500 would mean $500,000.    This type of coverage will pay for the losses of the person or people you hit but will not cover anyone in your car.  The third number is the total amount the insurance company will pay for property damage for one accident meaning a 50 would provide $50,000 of property damage pay outs.  Most states require all drivers to carry a minimum amount of liability coverage.

The remaining types of coverage included in your policy protect you from losses.

The first is Personal Injury Protection coverage which is also called Medical Payments.  This covers medical expenses for you and anyone in your car resulting from an accident.

Next is Uninsured/Underinsured Motorist coverage which pays for your pain, suffering, and other damages if you are injured as the result of an uninsured driver’s negligence.

The other two common types of coverage are Collision and Comprehensive.  Both cover the cost of repairs to your vehicle.  Collision pays for damage resulting from an accident and comprehensive covers damage caused outside of an accident.  Most leaseholders and auto finance companies require that cars financed through are protected with collision and comprehensive coverage.

The first step in determining how much insurance you need is to decide which of the standard coverages you need.  The next step is to determine how much of each coverage you need.  The best starting point is to review your state’s minimum requirement, unless you live in New Hampshire, which is the only state that doesn’t have a minimum requirement.

Here in Arizona, drivers are required to have Liability coverage with limits of 15/30/10 and are not required to carry uninsured motorist coverage according to the Arizona Department of Transportation. For most drivers, this amount of coverage is not enough to provide the protection they need.  First, the limits are very low compared to the cost of medical care and the value of automobiles.  This means that if you are at fault in an accident and the medical bills of the people in the other car exceed $30,000, you will be responsible for paying for everything over and above that amount.  Second, the state minimum only provides protection for other drivers, which means you will be responsible for your own medical expenses and all car repairs.  Additionally, with a liability only policy, you will have no recourse to recover damages if someone without insurance injures you in an accident.  Third, purchasing only the state minimum won’t pay for damages or loss if someone steals your car or a tree falls on your car.

Once you know the minimum coverage required by the state, the final piece of the puzzle is to decide what you need over and above that minimum.  This will be determined by what assets you have to protect.  Add up the value of your assets including your house, car, investments, retirement accounts, bank accounts, and property and then choose policy limits that exceed that value.