Ouch!

A friend, whose daughter is away at college, recently loaned her car to a friend. Unfortunately, the friend had no insurance, but was at fault in an accident. So, the burden of responsibility fell to my friend's insurance policy.

Personal Risk Management Tip...

Unless you intend to insure your kid's friends and their choices, it's probably worth discussing the ground rules with your kids if they're going to stay on your insurance policy.

Such risk may not be covered under a personal auto policy because the roommate's car is "available for regular use." If prohibition is not the risk management method of choice, adding the extended nonowned endorsement to the personal auto policy would also solve the problem.

~ Jon

Commercial Use

Quite often, I have just grabbed the keys to my car and used it for work stuff. After all, it was easier and I could be reimbursed for the mileage, so it wouldn't cost me anything... and any place other than 8 miles up a dirt road, it might even make me some money.

My insurance guy kept telling me that my insurance policy had a "clause" that prohibited work use. What I've come to learn is that it actually means: "We won't cover you if you... you're on your own because it's either best insured elsewhere - or you should be paying more for that coverage."

If you've got a work exclusion in your policy (like I do) and you do use your vehicle for work stuff (even if it's just errands or picking someone up from the airport), you might not be covered. You're essentially "retaining" your risk... willing to pay for the damages if something happens. But there are ways to solve that... it just depends on your situation and the company's policy.

Risk... and markets

The term "market" is often used by insurance agents, referring to insurance companies, and I've wondered why for a long time. In the common mind-set, I as the consumer often assume that I am "buying" insurance. Thus, I would be the market for the insurer in the most common "consumer's" perspective.

However, if we look at this from a "risk" perspective, I am actually asking the insurance company to take on my risk for a price (premium). Essentially, I am selling risk... and I've got to find a market for that risk. Fortunately, the insurance industry specializes in putting the two markets together.