Some drivers won’t have their repaired vehicles until as late as October, but won’t be underinsured.
Recently, GM announced that it would be providing drivers with loaner cars when their vehicles are affected by the recall involving faulty ignition switches, and now they have announced that they will also be providing those drivers with auto insurance, as well.
This is an important announcement as there are 1.6 million vehicles being recalled, with 1.37 million in the U.S.
The primary struggle that has lead to this need for auto insurance coverage of loaner cars is that the automaker has now announced that it will not have enough replacement parts for all of the recalled vehicles until October. This leaves some owners without their vehicles for over six months because they won’t be able to receive the repairs until there are enough parts.
It is important to note that the typical auto insurance available on a loaner might leave you underinsured.
Though this type of exposure is minimized for many drivers when it is a matter of coverage for a one or two days. However, this situation involves driving a loaner car for a period of up to six months. This is a much longer time in which to be underinsured. The reason behind this type of exposure is the insured’s personal policy collision coverage will typically cover only up to the value of the driver’s own vehicle. This increases the risk when driving a loaner, as that borrowed vehicle might have a higher value than your own car. An additional point to this dilemma could be an even higher risk if the insured does not have collision coverage on their policy all together.
GM’s solution to this exposure is to compensate for this by paying for the additional coverage for the drivers of the loaners. So in the case of a vehicle being underinsured due to the difference in values, recalled vehicle is worth $7,000 but the loaner is a new (or newer) car that is worth $18,000, then only the value of the recalled vehicle would apply in the case of a collision.
According to the spokesperson from GM, Jim Cain, “We will cover additional costs/insurance for under-insured drivers.” He also pointed out that the car manufacturer will be covering the additional auto insurance fees that apply to drivers who are younger than 25 years.