What car insurance doesn't cover: your guide to car insurance exclusions

A man in a business suit sits behind the wheel of his car. He lowers his glasses to stare at something in disbelief.

Whether you have comprehensive car insurance, third-party property or third-party fire and theft, car insurance can be a valuable asset, but it doesn't cover every scenario. 

These limitations are known as car insurance exclusions, which are detailed in your product disclosure statement (PDS). To stay informed about what's typically included and excluded, check your PDS. 

In the meantime, we'll highlight what typically isn't covered here in this guide.

1. Does car insurance cover wear and tear?

Ever spilled coffee on your car's seats and wondered if your insurance would cover the cleanup? Or noticed a few new scratches and wished they'd magically disappear under your policy? 

Unfortunately, car insurance usually doesn't step in for these everyday hiccups. Those little marks and stains are part of what's called 'wear and tear', and they're generally not covered.

And like most things, your car’s value will tend to drop over time. This decrease in value, known as depreciation, isn't something your insurance will cover. Especially important to remember if you've locked in an agreed value for your car. You might want to give that figure a rethink when it's time to renew your policy.

Keeping up with regular maintenance is your best bet to ensure normal wear and tear don’t turn into bigger, more expensive problems down the line.

2. Does car insurance cover engine failure?

This is a common question, especially when faced with the dreaded scenario of an engine breakdown. 

Unfortunately, engine failure is typically an exclusion in most car insurance policies since such occurrences are often linked to normal wear and tear or poor maintenance. 

If you experience engine failure and your car is still under warranty, you may be in luck. Many car warranties cover engine failure, provided it’s due to manufacturing defects or other covered issues. 

Regular maintenance remains key. Keeping up with your car’s service schedule is the best way to prevent engine problems before they start. It’s all about giving your engine the care it needs to keep running smoothly.

3. Does car insurance cover mechanical faults?

While comprehensive car insurance covers a range of accidental events or natural disasters, most policies don’t insure breakdowns caused by mechanical, electrical or structural faults in the car.

Mechanical breakdown insurance, while available, is generally more expensive and not a typical choice for average car owners. Due to the higher costs and modern vehicles' reliability, most individuals prefer relying on standard auto insurance and regular maintenance.

Roadside assistance is an optional add-on, and if added to your policy, it can address immediate breakdown issues like a dead battery. It can also provide services like towing if your car becomes inoperable. However, it doesn't extend to complex repairs, such as overhauling a failed engine or replacing a damaged gearbox. 

4. Does car insurance cover tyres?

Comprehensive car insurance offers extensive coverage for your car, yet it typically excludes tyre problems such as punctures, blowouts or damage from driving on rough roads like potholes or unsealed paths.  

In these instances, tyre and rim insurance becomes a valuable option, providing specific coverage for tyre and wheel damages not included in standard comprehensive policies.

However, there are situations where comprehensive car insurance might cover tyre damage. 

For instance, if your tyres are damaged in a vehicular accident, they could be included in the overall vehicle damage claim. Additionally, comprehensive policies often cover tyre damage caused by vandalism or other deliberate acts.

To get a clear understanding of the coverage and exclusions, we recommend reviewing your insurance policy or consulting with your provider.

5. Does car insurance cover drink driving accidents?

Driving under the influence not only breaks the law but also risks voiding your car insurance, as it's seen as illegal and reckless behaviour. In such instances, insurers are likely to refuse claims for any damages or injuries. This could also lead to legal issues, higher future premiums, or even cancellation of your policy.

While holding a full licence permits you to drive with a blood alcohol level up to the legal limit, it's important to verify with your insurance provider how this might impact your ability to make a claim. Some insurers enforce a zero-tolerance policy regarding alcohol, which could affect your coverage even within legal limits.

Additionally, pay attention to what your policy says about prescription medications, especially if you're on medications that are necessary to disclose for your driver's licence. This could influence your insurance coverage, so it's important to be aware of these specific policy details as outlined in your PDS.

6. Does car insurance cover an overloaded car?

Overloading your car with too many passengers or excessive cargo is a clear exclusion in most car insurance policies, and thus, not covered. The rule is simple: only carry as many passengers as there are seats with seatbelts, and be mindful when loading items, such as during a house move.

If your car exceeds the legal weight limit or the items aren't secured properly, your insurance coverage can be voided. This also applies to anything you're towing.

To ensure compliance and maintain insurance validity, check your state or territory's guidelines for vehicle weight limits and consult your vehicle's manufacturer specifications for safe towing capacities.

7. Does car insurance cover repossessed or legally confiscated cars?

No, if your car has been impounded by the authorities or repossessed because you couldn't pay your loan, there's not much your car insurance provider can do to help.

8. Does car insurance cover unlicensed drivers?

Car insurance generally does not provide coverage when an unlicensed driver is at the wheel. If you allow an unlicensed individual to drive your car, or if you yourself drive without a valid license, any claims made during this period are likely to be rejected.

In scenarios where your car is used without your permission by an unlicensed driver, such as in theft cases or unauthorised use by someone you know, the situation might be treated differently. 

In most instances, insurance policies do cover theft, which usually requires a police report for the claim to be processed. However, the specific coverage details can vary, so it's crucial to familiarise yourself with the terms of your insurance policy, especially its exclusions.

9. Does car insurance cover unregistered vehicles?

Car insurance usually doesn't cover unregistered vehicles. If your car isn't registered, any insurance claims made during this time are likely to be denied, as valid registration is a legal requirement. 

It's important to keep your vehicle's registration up to date to maintain insurance coverage. Always check your policy or consult with your insurer for specifics regarding the impact of registration on your coverage.

10. Does car insurance cover you if you haven't paid your premium?

Generally, if your insurance policy has lapsed due to missed payments, you are not covered for any incidents that occur during the lapse period.

Alos, insurance companies typically do not allow back-paying to cover incidents that occurred during a lapse in coverage. If an accident happens while the policy is inactive due to non-payment, the responsibility for any financial costs usually falls on the policyholder.

If you find yourself in a situation where you've missed payments, it's crucial to contact your insurance provider as soon as possible to discuss your options. Some insurers may offer a grace period or payment plans to help you get back on track, but this depends on the company's policy and the terms of your insurance agreement.

11. Does car insurance cover modifications?

Car insurance can cover modified cars, but you must inform your insurer about any changes, such as engine upgrades, suspension alterations, bodywork changes, or high-end audio systems. Undeclared modifications can be excluded from your policy, potentially leading to complications during claims.

The impact of modifications on insurance premiums varies. Enhancements that boost performance or car value typically raise premiums due to increased risk factors. However, modifications aimed at safety or accessibility may not affect premiums similarly.

When insuring a modified vehicle, look for insurers who offer coverage for such vehicles, often through specialised policies. Ensuring your policy accurately reflects your car's modifications is essential for maintaining comprehensive insurance protection.

12. Does car insurance cover motorsports or reckless driving?

In Australia, ‘motorsport’ activities like racing, speed testing or competitive driving are high-risk and typically excluded from normal car insurance policies. 

Reckless driving behaviours such as excessive speeding, driving under the influence or illegal street racing also fall outside standard coverage. Such actions not only pose risks to the driver and others but also breach most insurance policies' terms, leading to potential claim denials.

For those involved in motorsports, specialised insurance products are available, providing coverage tailored to the unique risks of organised racing events. These policies differ significantly from regular car insurance. To ensure compliance with your insurance, it's crucial to understand your policy's scope, particularly regarding driving habits and vehicle use.

13. Does car insurance cover hiring out your car?

When you hire out your vehicle, it's often considered a commercial use, which standard personal car insurance policies usually don't cover. This is because the risk profile changes when a car is used for commercial purposes, such as hiring or ridesharing.

However, there are specific insurance products designed for these situations. If you're planning to hire out your car, you should look into commercial or rideshare insurance policies. These policies are tailored to cover the additional risks associated with hiring out your vehicle.

Before hiring out your car, it's crucial to inform your insurer and switch to a policy that covers commercial use. Failing to do so can lead to your standard insurance policy being voided in the event of a claim while the car is hired out. Always check with your insurance provider to ensure you have the appropriate cover for your intended vehicle use.

14. Does car insurance cover ridesharing?

As mentioned above, standard car insurance policies in Australia typically do not cover ridesharing. Similar to hiring out your vehicle, ridesharing is considered a commercial activity, and standard personal car insurance policies are usually not designed to cover this.

To ensure coverage while driving for a ridesharing service like Uber or DiDi, you will need a specific rideshare insurance policy or an endorsement added to your personal car insurance. These tailored options address the unique risks associated with using your personal vehicle for commercial passenger transport.

It's important to inform your insurance provider if you plan to engage in ridesharing and secure the appropriate coverage. This step is necessary to avoid potential financial risks in case of an accident or damage during ridesharing activities. 

Additionally, it's advisable to review the insurance coverage provided by the ridesharing service itself, as their policy may offer additional but limited protection.

15. Does car insurance cover restricted drivers?

In Australia, car insurance typically does not cover restricted drivers if you have added a driver restriction to your policy to save money. Such restrictions are designed to lower the risk and, consequently, your premiums by specifying who can legally drive your car under the policy, often based on age or driving experience.

Therefore, if a restricted driver drives your car and is involved in an accident, the insurance is unlikely to cover it. 

It's important to be fully aware of and adhere to the conditions of any driver restrictions in your policy. If the driving circumstances of your vehicle change, such as a new regular driver who doesn't meet these restrictions, you must inform your insurer promptly to avoid issues in the event of a claim.

16. Does car insurance cover non-roadworthy cars?

No, car insurance in Australia generally does not cover non-roadworthy cars. Being roadworthy, which means meeting the minimum safety standards set by state or territory regulations, is a fundamental requirement for insurance. If your vehicle is involved in an accident and is deemed non-roadworthy, your insurance provider may refuse to cover damages or injuries resulting from the incident.

It's essential to maintain your vehicle in a roadworthy condition not just for insurance purposes, but also for the safety of yourself and others on the road. Regular maintenance and timely repairs are important to ensure your vehicle meets the required safety standards and your insurance coverage remains valid.

What else isn’t covered by car insurance?

Car insurance policies often have a list of specific exclusions, and being unaware of these can lead to unexpected surprises at the time of a claim. Here are some other situations where car insurance will probably not cover you:

   ✗ Loss or damage resulting from intentional actions by you or with your consent.

   ✗ Situations involving revolution, war or terrorism.

   ✗ Repairs for pre-existing damage or loss of value due to repairs.

   ✗ Unauthorised repairs or using incorrect fuel or lubricants.

   ✗ When your car is used to transport dangerous, hazardous or poisonous goods.

   ✗ If the driver leaves the scene of an accident illegally.

   ✗ Liability for death or bodily injury (covered by compulsory third-party insurance).

   ✗ Consequential losses, such as lost income, stress-related losses,or medical expenses.

   ✗ Driving your car after it has been damaged, leading to further damage.

   ✗ Failure to take reasonable precautions to prevent loss or damage.

   ✗ Replacement of parts not damaged in an incident, including parts of a set.

   ✗ If your car is used for any unlawful purposes.

   ✗ Damage, loss, cost or legal liability arising from agreements or contracts accepting liability.

   ✗ Loss or damage involving asbestos or pollutants/contaminants.

   ✗ Loss during private sale transactions or test drives.

   ✗ Theft or damage when the car is left unattended and unlocked.

This list is a general guide and may vary based on specific policy terms and insurers. It's always recommended to read the Product Disclosure Statement (PDS) for detailed coverage information.

Bottom line

When it comes to car insurance, it's just as important to know what isn't covered as it is to understand what is. This awareness of common exclusions, from everyday wear and tear to specific scenarios like using your car for ridesharing or driving without a valid licence, is vital for navigating your policy effectively. 

To ensure you have the right protection for your needs, it's important to compare different policies and thoroughly review their Product Disclosure Statements (PDS). By taking the time to understand these details, you can choose a policy that aligns with your driving habits and provides the level of coverage you require, safeguarding your financial well-being.

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