The IPS Agency Blog

When shopping for car insurance many tend to look for the lowest price they can find.  TV and radio ads fill the airwaves luring people to change companies based on lower premium cost or saving money.   

With anything you buy, it is wise to be certain you are receiving the “best value” for the money you spend.  But even “best value” means different things to different people.  When it comes to insurance, it means lowest premium price for some.  For others it means finding the best possible coverage and, for others, it means the best combination of the two.  

The difficulty with insurance is that you’re not buying something shiny and nice; you’re not buying anything that gives you bragging rights, nothing to enjoy on a nice day, or to show off to your friends.  What you are buying is a contract – a packet of paper that is a promise to pay in the event certain types of loss occur.  It should provide you with security and the knowledge that it will protect you should catastrophe strike. 

“So…why not shop for the lowest price?  After all, all auto insurance policies cover the same types of loss, don’t they”?

That’s true – for the most part.  The law requires all Michigan Auto Insurance policies to include residual bodily injury and property damage liability, personal injury protection, and property protection insurance.  Insurance companies also offer optional coverages like comprehensive, collision and a host of other things.  The question isn’t always what they cover, but how the coverage applies.  You have, no doubt, heard the phrase, “the devil is in the details”.  Car insurance is no different.  There are some “behind-the-scenes” things lurking within the policy wording that vary from one policy to the next – things that aren’t on the declarations page and certainly are not obvious…that is, until you experience a loss that your insurance company does not cover and another may have. These seemingly subtle differences buried within the Insurance Fine Print can cost you a lot of money should the right (or should we say, wrong) set of circumstances come your way.

But first, a little lesson on “Understanding your Michigan Auto Insurance Policy 101”.  Trying to read and understand any insurance policy can be frustrating unless there is a basic understanding of how a policy is constructed.  A typical Personal Auto Policy is divided into at least six major sections (Liability Coverage, Medical Payments Coverage, Uninsured Motorists Coverage, Coverage for Damage to Your Auto, Duties After an Accident or Loss, and General Provisions).  Each coverage section is almost like its own little policy within a policy and each has its own insuring agreement, definitions and exclusions.  It is important to know which section is being discussed to understand how coverage applies. 

With that said, this article focuses on how Personal Auto Policies can vary with respect to the way they address certain types of business uses of a vehicle – how not all auto insurance policies are created equally!  We’ll begin by saying that, with very limited exception, vehicles used in the course of business are not eligible to be insured on a Personal Auto Policy.  A Business Auto Policy may be a better fit because language in the personal auto policy could leave a person completely without insurance if a vehicle is being used outside of the policy’s boundaries.  This is not something you want to learn after the loss!

For purposes of our comparison, we examined the Personal Auto Policy from six Michigan insurance companies.  Five out of the six policies contain the following exclusionary wording in the Liability Coverage section: “We do not provide Liability Coverage for any “insured” for that “insured’s” liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.  This exclusion (A.5.) does not apply to a share-the-expense car pool.”  In insurance lingo, a “public” auto is a vehicle used to transport people for a fee. Taxis, limousines, airport shuttles, buses are examples of public autos.  The term “livery” is a broader – it includes the use of a vehicle for the transportation of people or goods.  Stated another way, when money is received for moving people or goods from one place to another, the vehicle should be covered by a Business Auto Policy.  On the other hand, if a vehicle is used only to get you or the tools of your trade to the place where you earn money, you are probably OK with the Personal Auto Policy.  There may be other considerations, but this should act as a good rule of thumb. 

Do you ever volunteer for your church or other non-profit organization where you may give someone a ride to the airport, pick up people for church or give a fellow member or a friend a ride to a doctor’s appointment? If your policy contains wording like the above, it is possible that you might not have coverage while using your car for this purpose!  Some of the policies we reviewed (but not all) have modified the above exclusion to allow for this type of vehicle use by adding the following words:  “…or to use the insured car for volunteer or charitable purposes or for which reimbursement for normal operating expenses is received.”  Another company adds even better wording by saying: “…nor does it apply when the vehicle is used for non-remunerative volunteer or charitable purposes or for which the person is reimbursed for normal operating expenses.”  At first glance, this whole exclusion may sound trite.  But the fact that it contains an exception for a cost-sharing car pool or, in some cases, volunteer work, should be a clear indication that it is intended to apply in a wide variety of circumstances.  Imagine being involved in a serious accident while volunteering and being sued for an enormous amount of money only to learn that you have no coverage.  That could certainly ruin your entire day!

Now… think of this.  Have you or someone in the household ever had a paper route and used the family car to make deliveries?  Have you ever thought of taking a job delivering sandwiches or pizza?  You may want discuss this with your insurance agent before taking that job.  Many insurance companies interpret these uses of a vehicle to be “livery”.  In these examples you are being paid for driving which makes this commercial use of your vehicle.  One very popular insurance company takes this exclusion a step further to make their intent crystal clear.  The exclusion in the liability section of their policy says:  “Coverage under this Part I, including our duty to defend, will not apply to any insured person for bodily injury or property damage arising out of the ownership, maintenance or use of any vehicle or trailer while being used to carry persons or property for compensation or a fee, including, but not limited to, pickup or delivery of magazines, newspapers, food or any other products.  This exclusion does not apply to shared-expense car pools”. 

The wording for these exclusions was taken from the Liability Coverage section of the policies but it is important to note that similar exclusions also appear in each of the other coverage sections throughout the policy.

The whole point of writing this article is to emphasize that not all Personal Auto Policies are the same.  Much lies within the “Insurance Fine Print”.  When shopping for auto insurance, price should not be the only deciding factor.  Our advice is to work with a knowledgeable Independent Insurance Agent that can find the policy best suited for your particular circumstances and needs. 

Insurance Planning Service is an independent insurance agency offering a full range of insurance products – auto – home – business – life – health – to individuals, families and businesses throughout Michigan.  Call or visit us on the web today for a quote on your insurance!

734.421.9900  |  800.220.5582  |  www.ipsagency.com