UK Motor Insurance – Policy Exclusions

There must always be exclusions in any car insurance policy. No policy can cover every possible event that might arise so insurers put exclusions into a policy to limit their exposure to the risks being run so that they can measure and quantify the risks they are accepting.

The exclusions at the end of the policy will apply to all sections of the policy. Again, the order and wording will vary from one policy to another.

The following list is typical of the exclusions you might find in your policy.

The first one excludes any driver not covered by the policy. This is a ‘belt and braces’ job. Your certificate of insurance and your schedule tell you who can drive the car. This exclusions tells you that no one else can drive the car and your claim will not be met except: when the car is stolen being used by a motor trader or where you did not know the driver was not licensed to drive a car

The next batch of exclusions are standard to all property types of policy. These are the nuclear or radioactivity exclusion; the war risks exclusion and so on. Such risks are the responsibility of government and not the insurance industry.

Finally there is a geographical exclusion to ensure you only use your car in those parts of the world your insurers are prepared to cover you.

Policy Exclusions – Policy Excess

Most policies now carry a compulsory excess and you might have volunteered for a higher excess to save some premium. YOU MUST PAY THIS NO MATTER WHO IS TO BLAME FOR THE ACCIDENT, LOSS OR DAMAGE. Hardly a day goes by in a claims office but there is a telephone call from an irate customer saying, ‘why do I have to pay an excess when it was the other drivers fault?’

Policy Exclusions – Loss of Use

Another likely exclusion in your car insurance policy is ‘loss of use’. This section of the policy does not provide you with any means of alternative transport.

Some insurers have a network of approved repairers who will supply you with a courtesy car if one should be available. A few insurers have a hire car scheme added to their policy whereby they will book a car for you from their chosen hire car company. Most do not have either of these things.

Most insurers offer a hire car extension to their comprehensive policies. The extension is expensive and the policy cover is quite limited. You must decide if you need to buy it. It is not an essential ‘add on’ for everyone. Ask yourself these questions:

If my car was off the road would I still be able to :
– get to work (by bus, train, cycle, walk)?
– take the children/grandchildren to school?
– go shopping
– go on holiday?
– pursue my social interests, hobbies, sports etc?
If you could cope without a car for a few days, you do not need to buy this cover. If you can’t then you should check that you have this cover.

Remember, if an accident is your fault, or your car is stolen, you won’t be able to recover any hire car costs from another person. You won’t be able to go and see a ‘credit hire’ firm. You can’t rely upon the prospect of a courtesy car from the garage. So this extra cover becomes valuable to you.

Equally, if you do not want to use the recommended repairer of your insurance company, or your car is a total loss, your hire car cover will come to the rescue. Let us look at what you might expect from a typical policy.

You can only hire a car if yours if off the road for more than 2 days, but the maximum hire period is 14 days. If you need it for more than this you will have to pay the hire firm yourself.

You can’t have a hire car for a windscreen or glass only claim.

There is usually a delivery maximum so if you live out in the sticks and the hire firm is some distance away from you, expect an additional charge if you arrange them to deliver it to you. Can you get to the local depot yourself?

Your own motor policy will cover the hire car for comprehensive benefits. That helps your insurer to keep down the cost of the hire car cover but if you have an accident in it, the claim will be on your policy.

The car can only be hired from the date your car goes in for repair if the damage to your car is such that it is still safe and legal to drive. If not, you can have the car from the date of the accident.

Policies might impose a maximum period of hire, such as 14 days. If your car is repaired prior to this date, you must return the hire car as soon as you have your car back.

The car supplied is likely to be a small, manual gearbox vehicle no more than a year or two old. If you need something a bit bigger you might have to pay extra. If you need an automatic efforts will be made to locate one for you within the vehicle groups specified in the cover. The hire car will usually come supplied with a tank full of fuel. You must return it with a full tank of fuel. If you don’t you will be charged by the hire firm for a fill up. And they charge a very high price per litre!

Some hire firms will want to collect your credit card number, if you have one, against the possibility of having to fill up your car or bumping it whilst out and about.

Finally the cover under this section only applies to the UK.

Also make sure you know what your excess is, and remember that young or inexperienced drivers have additional excesses to pay. It should be clearly shown in your policy book or schedule.

There have been many heated discussions by telephone with people who did not know what their excess was or that they had to pay this in the event of a claim, irrespective of blame. The reason you have to pay this first is because you have entered into a legal contract with your insurers in which you have agreed to pay the initial amount of each and every claim.

So you are not insured for the amount of your excess and furthermore, it is the first layer of the financial loss that has been incurred. If you are not at fault for an accident, you have the right to claim it back. See the chapter dealing with Third Party Claims for more about ‘uninsured losses’

Policy Exclusions – Fair Wear & Tear

Obviously your insurer does not want to pay for the normal maintenance, servicing or wear and tear to your car. So suppose your accident dented panel is rusted through, your paint work is faded or you damaged exhaust pipe was near the end of its life anyway. This is the exclusion your insurer will rely upon when getting your car repaired. Your insurer will tell the garage to charge you for ‘betterment’ or a ‘contribution’.

When the garage fit new parts to replace parts worn out or rusted, you are having the car improved. That is contrary to the principle of ‘indemnity’ and you will be asked to pay the value of the improvement. A good quality insurer will nowadays only ask this for parts you normally expect to replace during the life time of the car, e.g. tyres, battery, exhaust and so on.

Standards vary from one insurer to another. You should expect a good insurer to:

– tell you in writing what you are being asked to pay, in advance, and why
– be prepared to discuss and negotiate your share of the repair cost, if any (but don’t you be unreasonable either!!)
– only charge for parts replaced you would normally expect to replace during the life of the car

Policy Exclusions – Mechanical & Electrical Faults

The next exclusion is for mechanical or electrical faults. These faults are a matter of maintenance, or lack of it, and are not claim-able. It is not the intention of a motor policy to protect you from the cost of looking after your car. You can buy ‘extended warranties’ when you purchase a car. It is a separate area of insurance.

Similarly, cuts, punctures and bursts to your tyres are not covered unless it was the accident that caused the damage to the tyre. So if you have a puncture, which leads to an accident, the damage to your car will be repaired but you will have to buy a new tyre yourself.

Policy Exclusions – Deception

The next exclusion deals with deception. If you are tricked into parting with your car to a thief then you can’t claim. For example, suppose you are selling your car and the buyer gives you a defective cheque. The moral of this is’ for goodness sake, be careful when selling your car!’

Similar advice applies when buying a car. There is a ‘confidence trick’ that sells you a car for cash (a stolen car) then two or three days later, the ‘seller’ returns and steals the car back. They have the money, the car and what have you got? You did not obtain good ‘title’ to the car so had no ‘insurable interest’ in it. You can’t claim on your policy, so be careful.

There are several services available to the general public that do a check on the history of a car. They will tell you if it has been reported stolen or if it has the subject of a total insurance loss (a write-off). It’s a small price to pay for peace of mind.

Policy Exclusions – Depreciation

When your car is returned to you after repair, it should be as good as it was before the claim event happened. But if you tried to sell it and the mere fact it has been accident damaged is known to the potential buyer, you might not get the value you would have if the car was not the subject of accident damage.

This is more of a problem with higher value upmarket models. It has never been the intention of insurers to pay for a reduction in the value of a car that has been repaired properly following an accident. As an insurer was forced to pay out a few years ago on this very point, insurers now have this exclusion in the motor policy to make the position clear. They will not pay.

Policy Exclusions – Replacement Cars

Most but by no means all motor insurers have a replacement car clause in their loss/damage section. Usually they will supply you with a new car if yours is damaged to an extent of 50% or 60% of its value, or if is stolen. You must have owned the car from new, with no previous registered keepers, and it must be less than 12 months old when the claim event happens. A new car will only be supplied if the same model and specification is available.

This is a brilliant clause for all who own a new car and for the insurers as well. If you are thinking of buying a new car, check out your policy carefully to make sure it has this clause. If not find another insurer. Many new cars these days are sold with ‘free’ insurance. Check out carefully if it provides the cover you require. You might be better of with your current insurer, paying a premium.

I really do not understand those insurers who fail to put it in their policy. It gives the insured a valuable benefit – those that don’t have it lose sales – and the insurer can often make savings on claims. Owing to the purchasing power of motor insurers and their connections in the motor trade, they can usually buy new cars for a lot less than you or I. So it is sometimes cheaper for them to supply a new car than to pay you a fair ‘market value’ on a car just a few weeks old. Outstanding finance is not usually a problem. The loan company will substitute the new car on the agreement for the old car.

Policy Exclusions – Audio and Electronic Equipment

This part of the loss/damage section varies quite a lot from one insurer to another. Some will pay out unlimited amounts for your audio equipment, others impose limits. Some impose limits if you do not use the insurers chosen supplier. Over the last 10 years or so this type of equipment has become very sophisticated. 10 years ago the best you had was a stereo radio/ cassette player and a couple of speakers, or an ‘8 track’. Now, the radio cassette is the bottom end of the market, feeding multiple loudspeakers. Then there is CD players, CD auto changers amplifiers, loudspeakers, and of course mobile phones and GPS navigation systems.

As with windscreen claims, insurers prefer to use specialist suppliers who stock large supplies of all the latest gear and charge insurers a lot less than you or I pay for it. Indeed, where audio equipment is damaged in an accident, the insurers will delete it from the repair estimate and arrange for specialist suppliers to fit it after other repairs have been completed. It saves them money which in turn helps to keep all our premiums down.

If you have special, non standard equipment fitted to your car, check that your policy gives you enough protection!

Policy Exclusions – Personal Effects

A comprehensive policy will usually provide some limited cover for your personal possessions. This cover might have its own special section in your policy.

Important points to watch out for are:
Look for the exclusions in the ‘small print’. You won’t be able to claim for money or valuables. It is not the intention of a motor policy to cover valuable items in your car. You can obtain cover under your household contents policy.

There is usually a limit of £100 or £150. This has not changed for many years! So if you have more personal effects than this in your car, your policy limit will apply and you will receive the limit. From where I sit, it is amazing how many people have just about £100 worth of personal effects in their car all the time!!

It is not ‘new for old’ cover. Insurers can deduct for fair wear and tear. If you have a tatty worn out coat you can’t expect to be paid the cost of a new one. You would be getting better than you had before and that is contrary to the principles of insurance. Again from where I sit, nearly everyone who claims have new or almost new personal possessions. And of course, no one keeps receipts to prove that.

Many insurers now apply your excess to this part of the policy. So if you have just had your personal effects stolen and there is no other claim for your car, forget it. Don’t bother to report it to your motor insurer. If you have adequate cover on your household contents claim on that instead.

Also, don’t try and claim for the same loss on both policies without telling them you are doing so. You cannot be paid out by two insurers for the same loss in such a way as to make a profit. There are sophisticated computer database’s that insurers subscribe to for the very purpose of catching people who try this sort of fraud.

Buying Car Insurance – Your Obligations

Yet more ‘small print’. This time it is setting out the rules that you must obey to keep to your side of the deal. They tell you that:

You must look after your property properly. You can’t expect your insurer to bail you out if you don’t.

You must pay the premium when asked for it. Your side of the financial transaction. If you pay by instalments and make a claim, you must pay off the remaining instalments for the rest of the year.

You must report accidents promptly. It is very important that your insurers have the chance to investigate whilst evidence is still ‘fresh’. Changes to the civil law took place in April 1999 with the ‘Woolf Reforms’ and these require insurers to complete investigations very promptly.

Even if your car has not been damaged, you must report the accident. If nothing comes of it, your claim file will be closed without affecting your no claims bonus. So many times car drivers think they can get away with it themselves only to end up with a nasty shock. There are many sharks out there waiting to rip off the insurance industry and you are playing into their hands. That is bad news for you, not your insurers, as your premium (and everyone else’s) will go up. So please don’t bury your head in the sand, report any accident no matter how trivial you think it is to your insurers immediately.

Remember, when it comes to a third party claim, your insurer is on your side. Your insurer makes the decision on how to pay your claim. For example, by repairing your car.

If there is outstanding finance on the car then your insurer must pay off this debt first when your car is stolen or written off.

You must not pay any third party claim or make any admissions of liability. That is quite difficult to do, I’ve been there. Accidents put you into a state of shock. So you can’t think clearly. But consider this, any comments you make might put your insurers in the position of having to pay the other drivers claim when it wasn’t your fault. And that might hit your no claims bonus! It is difficult for them to wriggle out if you say ‘I’m sorry’. And you would be surprised how much other people will twist around what you say to their advantage.

Your insurers have the right to stand in your shoes for the purposes of civil court action. This is called ‘subrogation’ It means they can defend any claim made against you, and use your name in the court proceedings or vice versa – recover from someone else in your name.

Don’t worry about it, they will usually talk to you about what they are doing. After all, you are their ‘star witness’. But very occasionally I have found some arrogant people who think they know better than the claims professional dealing with the matter on their behalf. Then the condition has to be called into effect. A recent example is a lady who drove out of a side road, across give way lines and collided with a car on the main road. She was adamant it was not there when she moved off – chances are she did not look properly! She insisted on going to court despite the advice of her insurers who wanted to settle the third party claim. Owing to her agressive attitude, they did not invoke this condition but let her go ahead on her own. She lost!

Sometimes insurers are forced by legislation to pay claims that are not covered by the policy. The next condition in the policy allows for this. It will only arise where you have failed to keep to your side of the policy terms and conditions or lied to your insurers when you took the policy out. For example you allow someone to drive your car who is not covered by your policy. They cause an accident and owing to the existence of your policy, legislation forces your insurer to pay the third party claim. They can then ask you to reimburse them.

Then we have cancellation clauses. These set out the rules by which you can cancel your policy and how your insurers can cancel it. You can only ask for part of your premium back if you have not made a claim. You must always send back your Certificate of Insurance. If you don’t then your insurer might well remain on risk for third party claims and will not cancel your policy.

Disputes of amounts to be claimed form the subject of the next condition. Usually customers take advantage of the complaints procedure rather than an arbitration service. You must make your car available at any reasonable time for your insurer to inspect it, even if you have not made a claim. For example they might be investigating a possible fraud and want to check out your car. By and large, the only time they will inspect your car is after an accident has arisen or after it is recovered following a theft.

Finally, there is the fraud condition. If you make a fraudulent claim, your policy will be of no effect, and they keep the premium too! So don’t do it.