In a car accident? This is why insurance may not pay out

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We buy insurance to protect ourselves from financial hardship, but the insurance doesn’t always pay out.


Key points

  • Insurance companies do not pay all claims. It is up to the driver what is covered and what is not.
  • Shopping for the right policy can take time, but it can pay off big in the event of an accident.

After passing our driving test, one of the most important things we can do is buy car insurance. A solid insurance policy can be the only thing standing between us and financial hardship after an accident. Although auto insurance policies can vary by state, the main reason for carrying insurance is financial protection.

Buying insurance is all about planning for events that “might” happen. In the spirit of planning ahead, let’s look at four main reasons your insurance may not pay out after an accident, and what you can do to prevent this from happening.

1. Expired coverage

Let’s get that problem out of the way first, because your auto insurance lapse is the easiest way to get a subsequent claim denied. Your insurance company will only approve a claim when it is valid and your insurance policy is paid up and up to date.

The answer: If your budgeting method is a bit messy, pay your insurance premiums in monthly installments. Set these installments to pay automatically through your bank so you never have to worry about a late or missed payment.

2. Driver Exclusions

This one is a bit more complicated but easily manageable. It is quite common for insurers to include “driver exclusion” clauses in an insurance policy. Let’s say you’re buying a new insurance policy. It’s easy to sign on the dotted line without reading the details of the policy. For example, your policy may say that your policy is in effect if you or a member of your immediate family is driving at the time of an accident.

Now imagine you’re out with friends one night, have a little too much to drink, and let a friend drive you home. On the way home, your friend almost falls asleep and ditches another car. Since your friend is not a member of your immediate family, the claim is denied.

The answer: Check driver exclusions before purchasing a policy and never allow anyone other than a covered driver behind the wheel.

3. Damages and injuries excluded

After there is an accident that results in injuries, your insurance company will try to determine what caused those injuries. Insurance policies contain a list of policy exclusions – circumstances in which it will not cover damage or injury. For example, a policy may exclude intentional acts of vandalism. Let’s say you’re at a pro football game, words are exchanged with a fan of the opposing team, and that person follows you to your car and kicks the door, slamming it badly. While you’re checking the damage on the car, the guy hurts you. Since vandalism is excluded, none of these issues will be covered by your insurance company.

The answer: As with driver exclusions, make sure you fully understand any damage or injury exclusions. Let’s say a company excludes storm damage and you live in an area of ​​the country where storms are the norm. Before you commit to a policy, make sure you have the type of coverage you’re likely to need. (Also, you might want to watch what you say to opposing fans at sporting events.)

4. Unclear who is to blame

After filing a claim, your insurance company will begin to investigate who is at fault. If you are involved in an accident with another vehicle, it will want to know which driver caused the accident. For example, if you are hit by another driver’s negligence, that driver’s insurance company should – in theory – cover the damages. However, if the insurer cannot establish that the policyholder did anything wrong, it will likely deny the claim.

The answer: There are three things you should do in case of an accident.

  1. Call the police. If you can safely move the vehicle, pull over at a safe location. No matter how much the other party begs you not to call law enforcement, call them anyway. An impartial police report is one of the best ways to defend your case.
  2. Take pictures. Get out your phone and take pictures of the scene and the vehicles from all possible directions. If, for example, your rear bumper is crushed, it will be difficult for the other driver to tell that you hit them.
  3. Exchange insurance information with the other driver. If they give you an insurance card, you might want to take a quick peek to make sure their coverage is still in effect. In any case, be as civil as possible and let the police do their job.

The most important thing with all car insurance is to fully understand what you are getting yourself into. Some policies are better than others and some insurance companies are nicer to work with than others. Even if it takes you a little longer to get a policy you like, take the time to read the policies and look at the insurer’s customer satisfaction ratings.

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