When Bad Insurance Happens to Good People


No one wants to pay more than they have to for home and auto insurance. That’s why it’s important to take a close look at each of your insurance policies to make sure you’re not paying for coverage you don’t need. At the same time, many people make the mistake of cutting costs to the point where they leave themselves underinsured, and as a result, end up being denied coverage for certain claims. Each insurance policy is specific in terms of what’s covered and what isn’t, so it’s important that you get your insurance policy right so you don’t end up in a bad insurance situation. With that in mind, here are some of the biggest mistakes people make that lead to bad insurance coverage.

Not Declaring Vehicle Modifications

Did you know that any modification you make to your vehicle, from a custom paint job to a change in engine size, can affect your insurance coverage? Any custom modifications you make to your vehicle (including adding a lift kit, changing the tire size, modifying the engine in any way, getting a custom paint job, etc.) could change how your vehicle is rated for insurance purposes. If you’ve made changes your insurance company doesn’t know about, they could deny an accident claim on the basis on non-disclosure. That’s why it’s important to make your insurance company aware of any vehicle modifications you make, no matter how big or how small.

“It’s important to make your insurance company aware of any vehicle modifications you make, no matter how big or how small.”

Insuring a Commercial Vehicle as a Personal Vehicle

In order to provide proper coverage, insurance companies need to know exactly what you’ll be using your vehicle for. Even if you just use your vehicle to carry tools and construction materials to and from job sites, it could be classified by your insurance company as a commercial vehicle. If you get into an accident while you’re using your vehicle for work, but you only have it registered as a personal vehicle, your insurance company could deny your insurance claim. This applies to anyone who uses their vehicle for work, from real estate agents to contractors, delivery drivers, and anyone else who carries materials or passengers in their vehicles for commercial purposes.

Not Declaring a Home-Based Business

Just like using a vehicle for commercial purposes affects your auto insurance, running a home-based business changes the nature of your home insurance needs. And, just like with auto insurance, any home-based commercial activity, no matter how big or how small, could impact your home insurance coverage. For example, if you’re a welder who’s working on a project for a client in your garage, and your welding tools set off a garage fire, you could be denied your insurance claim because you didn’t tell your insurance company that you do welding work at home. These same types of situations can arise with other types of home-based businesses, from hair salons to medical offices to legal practices. In order to ensure you’re properly covered, you need disclose all home-based commercial activities to your insurance company.

Failing to Declare a Rental Suite

Not only is a rental suite a commercial venture, it also introduces new occupants to your property, and as such, will change the nature of your insurance coverage. If you’re running a rental suite that your insurance company doesn’t know about, you won’t be covered for any claims associated with the rental suite. It’s also important to note that the homeowner’s insurance policy only covers the homeowners themselves, so if the tenants want liability insurance and coverage for their own belongings, they need to purchase their own tenant insurance policy.

Insuring an Unlicensed Driver

While you need a valid driver’s license to purchase car insurance, issues with unlicensed drivers can sometimes go unchecked when multiple drivers are listed under one policy. Take for example a new driver who adds her boyfriend as a second driver to her insurance policy, not knowing that her boyfriend’s license has been suspended due to unpaid speeding tickets. If he gets into an accident while driving her car, her insurance claim could be denied because the person using the vehicle was driving without a valid driver’s license.

Not Checking Your Coverage Limits

With a standard home insurance policy, not every item in your home is guaranteed to be fully covered. For example, items like jewelry, business equipment, artwork, antiques and collectibles, and specialty wine all will have certain claim limits placed on them. If you’re concerned about any of these items, it’s important to check your coverage limits to make sure these items are properly insured. If not, you may have to change your policy to increase your coverage limits.

“All of these bad insurance situations come down to one common mistake: not providing enough information to your insurance company.”

All of these bad insurance situations come down to one common mistake: not providing enough information to your insurance company. The problem is that many people simply don’t know that they need to provide all of this information – that’s how bad insurance happens to good people. The best way to avoid these types of situations is to work with an insurance broker who will ask you the right questions to help you determine your coverage needs. That way, you’ll keep your premiums low by only paying for the coverage you need, and you’ll also avoid falling into the trap of under insuring yourself. Want to know more about how to find the right insurance policy? Contact us today to talk to one of our insurance brokers.

Location, location, location – we took this age old real estate saying to heart when we situated Scott Marit, Personal Insurance Account Executive directly in house at the First Foundation…

Learn more about Scott Marit