Car insurance can cover damage from accidents, vandalism and even meteor strikes. But no matter how good your car insurance policy is, it might not cover everything you think it does. And unexpected holes in coverage can cost you.
Here are a few instances when you may have an auto insurance gap, along with tips for how to cover it.
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1. Personal belongings in your car
Comprehensive auto insurance covers your car if it’s stolen or vandalized, but not the items you leave inside. After a smash-and-grab break-in, for instance, comprehensive coverage would pay to repair your broken window — minus the deductible — but wouldn’t reimburse you for the contents of the shopping bags swiped from the back seat.
Your best bet is to prevent theft by always locking your car and putting any belongings, especially navigation systems and other valuables, in the trunk or out of sight, the National Insurance Crime Bureau advises.
Coverage to fill the hole: Your homeowners or renters insurance will cover items stolen from your car, provided you file a police report. If the value of the items is less than your deductible, you’ll have to pay the full cost of replacement.
2. People who live with you but aren’t listed on the policy
A standard car insurance policy generally covers you and other people who don’t live with you and who have permission to use your car occasionally. Members of your household must be listed on your car insurance policy to have coverage.
Coverage to fill the hole: Ask your insurance agent who has coverage when driving your vehicle. You’ll likely need to list all members of your household who have driver’s licenses, including roommates, on your policy.
3. Your car loan, if your vehicle is totaled
Having collision and comprehensive insurance doesn’t necessarily mean you’re in the clear if you total a financed car. In that case, the insurance company will issue a check for the car’s market value, minus your deductible. Because of depreciation, the payout could be lower than the amount you owe on the car loan. This is most likely if you made a small down payment and have made three years or fewer of payments on the loan.
Coverage to fill the hole: Gap insurance pays the difference between your insurance claim check and the outstanding loan balance. You can buy a policy through your car insurance agent or an insurance company representative.
You might be required to have gap insurance if you lease a car. The car dealer usually provides the coverage, and the cost is included in your lease.
4. Custom parts and equipment
If your car is damaged or stolen, auto insurance won’t cover custom parts and equipment you added to the vehicle. That can include:
- Technology, such as stereo equipment, TVs, DVD players and in-vehicle communication systems.
- Custom seats or interiors.
- Aesthetic enhancements, such as custom rims, grilles, paint and spoilers.
- Performance enhancements, such as high-performance exhaust systems.
- Wheelchair lifts and other modifications to assist drivers and passengers with disabilities.
Coverage to fill the hole: Many insurers offer an optional customized parts and equipment policy.
5. Delivering pizzas and other business uses
Standard personal auto insurance covers your commute, but not business uses. Delivering products and transporting people for hire — driving for Uber, for example — are excluded under standard personal policies.
That means your insurer can decline to cover any damage you cause or receive while using your car for business. At worst, your policy might be canceled, even if you only use your car for business part of the time.
Coverage to fill the hole: If you use your car for work, ask your employer when and how much coverage you receive under the company’s policy. If your employer’s insurance doesn’t cover your car, or if you’re self-employed, ask your car insurance agent about commercial auto coverage.
Ride-sharing outfits such as Uber and Lyft provide drivers commercial coverage when they’re logged into the apps. Policies typically have higher liability limits while drivers are transporting customers and lower limits when they’re between passengers. In some states, you can buy insurance for ride-share drivers.
Understand what you’re buying — and not buying — when you get car insurance quotes. NerdWallet’s car insurance comparison tool can help you shop around. Talk to an agent or company representative if you need additional coverage.
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