Solutions to five car insurance situations

Linda Melone

Does your car insurance cover what you think it does? You may be surprised. Starting a business or even installing sporty new wheels could result in the denial of a car insurance claim.

You should review your car insurance policy thoroughly with your insurer to avoid such surprises.

Keep in mind that a car insurance policy is a legal contract. "The insurance company is required to adhere to the contract," says David Miller, president of Brightway Insurance in Jacksonville, Fla., "and they almost always do."

Here are five situations that may pop up with your car insurance policy and how to maneuver through them.

Situation No. 1: Your neighbor drives your car and crashes it.

Solution: You're covered if you have a "broad form" policy.

Jeff Baker, a State Farm agent in Huntington Beach, Calif., says most big-name insurance companies have a "broad form" policy, which covers all family members along with anyone you give permission to drive your vehicle. A named-insured policy, on the other hand, covers only those named on the policy.

Not all companies use broad form policies, however. Most big-name carriers do, but some of the smaller ones can offer lower prices because they don't have broad form policies, Baker says. Your neighbor may not be covered under a "named-insured" policy.

If your neighbor -- or even your daughter or a friend -- is not listed on your named-insured policy and gets into an accident while driving your car, you may be covered only for minimum liability, which varies from state to state.

Situation No. 2: You get new wheels.

Solution: You're covered if you add them to your policy.

If you decide to add appeal to your tires with a set of fancy wheels, they won't be covered under your original policy, says Khashayar "Kasha" Fadaie, president of Fadaie Insurance Services Inc. in Temecula, Calif. In this situation, you'll need to contact your insurer and ask for extra coverage on your policy, Fadaie says.

Otherwise, if your wheels are stolen, the company will cover only the tires (and wheels) that were on the vehicle when you insured it. It's similar to declaring jewelry on your home insurance policy; any jewelry that you don't declare isn't covered.

Situation No. 3: You left your car running and someone stole it.

Solution: You're covered if have you comprehensive coverage.

Your car insurance policy’s comprehensive coverage pays if your car is stolen, even if you left the keys in the ignition with the car running, Miller says. After all, it's still a theft. Comprehensive coverage is optional, not mandatory.

Situation No. 4: You crashed your rental car while on business.

Solution: You're covered if you're on your company's policy.

You're out of town on business and need to rent a car. Are you still covered by your employer?

Only if you rent the car in the company's name and you're endorsed (your name appears) on the company policy, Baker says. Otherwise, your best bet is take out your own coverage through the rental car company.

Situation No. 5: You've started a business and use your personal car for it.

Solution: You're covered if you switch to a commercial policy.

If you are a business owner and register your car under your business name, your personal car insurance policy no longer will cover the vehicle, Fadaie says. You've got to cancel your personal policy and buy a commercial policy for that vehicle. "It's no longer your personal car," Fadaie says.

Commercial coverage may be more or less expensive than personal coverage, depending on the nature of your business and the chances that an insurance loss may occur. To avoid lapses in coverage, you shouldn't cancel your existing policy before switching to the commercial policy, Fadaie says.

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