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If you picked your auto insurance on the basis of what it costs because “all insurers offer the same coverage”, think again. In Minnesota, for instance, auto or umbrella insurance carriers can discriminate against, or even exclude, injured passengers who are related to the negligent driver.

One Minnesota family learned, to its sorrow, that a million dollar umbrella policy purchased from Travelers Insurance was no good when the negligent driver contributed to the death of family’s principal wage earner because the umbrella policy had a family member exclusion in it. The Minnesota Court of Appeals held that, as long as there was the minimum required coverage ($30,000 per person/$60,000 per accident) required by the Minnesota No-Fault Law available in the underlying liability policy, the umbrella insurer could completely exclude coverage for family members.

In another instance, the family learned that it’s USAA Insurance auto insurance, which provided up to $50,000 to an injured stranger, had been written down to the $30,000 minimum if the negligent driver was a family member.

Under insurance law, an insured is deemed to have read, understood and agreed to the terms of his/her insurance contract when the policy is purchased. While you might think that your insurance agent ought to be looking out and warning you about what is in the fine print of that policy, you can’t make that argument if you buy your policy over the Internet and never talk to an agent. Sadly, though, the Minnesota courts have uniformly held that an agent isn’t even responsible for knowing what is in the policy she/he sells. Insurance agents in Minnesota are mere “ticket takers” unless they have a “special relationship” to the insured.

Why exclude family members from liability and umbrella policies? Because family members are the single largest identifiable group in the population most likely to be injured by a negligent driver. Insurers argue that writing down liability coverage for family members to the minimum, or excluding family members from umbrella coverage, results in cheaper insurance to the consumer. Maybe so, but we believe that providing stripped-down umbrella or liability coverage at the expense of family members is a predatory business practice which ought to be outlawed.

The take-away? Buy your auto and umbrella insurance from a reputable broker. Be very wary about buying insurance over the Internet. Make sure your agent goes over the policy with you so both of you know what you are buying. Buy liability and umbrella insurance only from insurers which do not discriminate against family members. If one insurer’s liability or umbrella insurance is cheaper than another’s, it is likely that the cheaper policy is skimping on coverage. Know what you are buying.

Think about it.

One Comment

  1. The crazy idea that you would buy more coverage for a person you don't know or a neighbor than what you would buy to protect you family makes you wonder how it was explained. It wasn't, but it is another example of how a computer adjuster can sell at a lower rate. Great advice. People need to understand what cheap insurance really means.

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