Car Insurance Exclusions: What you don’t know

By Ross Lee
22 December 2008

Have you ever taken the time to read the fine print of your car insurance policy? You may be surprised to find out there are some basic conditions that you won’t be covered for.

While there may be a specific limit to what your policy does cover, there will also be excluded events. An event for which cover is specifically not included in the policy is known as an ‘exclusion’.

To clear up some grey areas if ever you get into a bungle, here are some common events where exclusions apply.

The driver was not authorised by the vehicle owner
Sometimes a friend can borrow a motor vehicle without permission. In those circumstances cover may be denied altogether by an exclusion clause.

Driver was under the influence of alcohol but was not tested for blood alcohol content by the Police
It is common for the exclusion clause in a motor vehicle policy to deny cover where the driver is under the influence of alcohol without any specific reference to having been tested by the Police.

The motor vehicle was “only a little bit un-roadworthy”
Even though a motor vehicle may be in a less than roadworthy condition and the relevant un-roadworthy part may not have any direct connection with the motor vehicle collision occurring, the exclusion clause for un-roadworthiness of a vehicle may apply.
If your vehicle had an “un-roadworthy” part, even if it may not be the cause of the accident, an exclusion clause for an un-roadworthy vehicle may apply, so don’t neglect the loose bolts and screws.

The car was carrying more passengers than its design
If a driver may be controlling a vehicle where the amount of persons inside it exceeds the number of seatbelts there may be no insurance cover. Cars are only designed to safely carry a certain number of passengers, so if there is more, the insurer may validly say the vehicle was not capable of being controlled properly.

The vehicle is hired to a friend for a fee
Be careful of lending your car. Even though your friend may not pay you cash, if the vehicle is effectively a hire vehicle in a collision, then an exclusion may apply.

The above examples are only several of many exclusions which may apply to your insurance policy wording in the Product Disclosure Statement - which is a legally binding contract of course. Today there are many different styles that insurers use to draft a policy which often makes it difficult to compare one set of exclusion clauses against another.

There are also many legal principles that shape how exclusion clauses work. For example, one long standing rule is that if there are two clauses of damage to a motor vehicle, one of which is excluded and one of which is covered then the excluded one prevails and cover may be denied by the insurer.

As with any contract, it is best to read the policy in the Product Disclosure Statement thoroughly before purchasing your car insurance policy, as you may find yourself caught out of luck if one of the exclusions applies when you need to make a claim.