Auto insurers across the country are cutting back on claim payouts at a rate I have never seen before. In fact, insurers in the U.S. are now denying or failing to pay out on just under half of all auto claims.
The insurance industry claims this spike is due to a surge in illegitimate bodily injury claims. But the reality on the ground is that everyday, honest consumers are having trouble getting all kinds of legitimate claims paid by their auto insurance companies.
As insurers look for ways to boost their profitability, they are enforcing contract fine print like never before. Here is what you need to know to protect yourself — and why standard habits from years past could leave you holding the bill.
The Risk of Letting Someone Else Drive Your Car
There used to be a time when loaning your car to a friend or relative was no big deal. If you let someone borrow your car and they got into a minor fender bender, your policy generally covered it.
That is no longer a safe assumption.
Allowing someone who is not explicitly named on your policy to drive your vehicle has become one of the top reasons insurers use to deny a claim or cancel your coverage altogether.
The scenarios: Whether it is a friend running a quick errand, a work colleague picking something up for you, or a relative borrowing your keys for the afternoon — don’t risk it.
The fine print: Many policies now explicitly state that unlisted drivers are not covered. My middle daughter’s auto insurance policy states in bold type that her vehicle is not covered for any driver other than the named insured.
The trend: While not every insurer enforces this strict exclusion yet, it has rapidly become common practice across the industry.
If you are trying to decide whether it’s okay to let an unlisted driver take your car, assume the answer is no.
Why Claim Denials Are Spike-Testing Consumers
Insurers spend billions on cute TV commercials promising to be there when life happens. But when it comes time to file a claim, the reality looks very different.
To be fair, some unpaid claims happen because the driver’s deductible is higher than the total damage, resulting in a zero-payout claim. However, the insurance industry is clearly and deliberately shifting toward strict contract enforcement to avoid paying out.
They will happily take your premiums, but they are scrutinizing every line of your policy to find reasons not to pay when you file a claim.
Price vs. Protection: Getting an Insurer That Actually Pays
I often get asked about my personal insurance choices. I have been fortunate over the years, and I insure my vehicles through Amica. They are consistently at the top of the heap year after year for customer satisfaction and claim handling.
However, good service often comes with a higher price tag. Someone recently came up to me at an airport and said:
“Clark, I called that company you’re always talking about, and they were five times the cost of my current insurer!”
While five times the cost sounds extreme, it highlights an important tradeoff every driver needs to make: Why do you carry insurance?
Option A: You carry insurance strictly to satisfy state minimum requirements at the absolute lowest price.
Option B: You carry insurance so that if something goes wrong, the company actually steps up and pays the claim without putting you through a nightmare.
Cheap insurance isn’t a deal if the company refuses to pay when you actually need them.
Final Thoughts
The auto insurance industry is tougher and stricter than ever. Protect yourself by following these core rules:
Read your policy fine print: Pay close attention to exclusions regarding unlisted drivers and household members.
Stop loaning your vehicle: Do not let friends, colleagues, or extended family members drive your car unless they are explicitly listed as named drivers on your policy.
Value claim performance over cheap rates: When shopping for auto insurance, don’t just look at the monthly premium. Research how the company actually handles claims before you sign on the dotted line. You can use our guide to the best auto insurance companies to get started.
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