Class 2 Insurance

What is 'Class 2 Insurance'

Class 2 insurance covers individuals that are not specifically named in an auto insurance policy. Class 2 insurance, also often written as Class II insurance coverage, applies to uninsured motorists. Class 1 insurance covers an individual occupying an owned vehicle, an individual occupying a vehicle owned by a resident relative, a pedestrian or a bicyclist.

BREAKING DOWN 'Class 2 Insurance'

Class 2 insurance coverage applies to individuals who do not fall under the Class 1 coverage restrictions, meaning that Class 2 insurance applies to individuals who are not the policy owner, not the spouse of the policy owner or not a resident relative of the policy owner. Resident relatives include individuals, typically immediate family members, who share a residence with the insured. For example, a Class 2 insured individual could be a friend of the policy owner. The coverage applies as long as the Class 2 individual is traveling in a vehicle identified in the insurance policy.

While Class 1 individuals are covered if they, as a pedestrian, are injured by a vehicle, Class 2 individuals are not covered in this way because they only receive insurance coverage while occupying a vehicle.

Even though Class 2 insured individuals are not the policy owner or a resident relative of the policy owner, they are still covered under the insurance contract as long as they are lawfully occupying the vehicle. Auto insurance policies provide coverage to the named policy owner and other Class 1 individuals, as well as passengers in the vehicle who are not related. Any uninsured motorist coverage thus applies to Class 2 individuals.

Stacking Uninsured Motorist Coverage

In the auto insurance industry, stacking refers to an option that a policy holder can purchase for uninsured motorist bodily injury coverage, underinsured motorist bodily injury coverage, or both. Stacking uninsured motorist coverage means that the coverage of two or more insured vehicles can be added together to increase the limit of uninsured motorist coverage. Put another way, stacking increases uninsured and underinsured motorist coverage limits based on the number of vehicles you’re insuring. If you insure two cars with the option, your coverage doubles; three vehicles, and your coverage triples. Thus, stacking gives you the potential to get more money for injuries than you'd be able to with just one policy. As a result, if the cost of your medical bills from an accident exceeds the limits of one policy, you can leverage the second policy to make up the difference.

Currently, approximately 30 states allow stacking. However, in a number of states that allow stacking, auto insurers are permitted to prevent policyholders from stacking their uninsured and underinsured coverage. In any case, because Class 2 insured individuals are not named in the policy and do not pay premiums, they also are not permitted to stack underinsured coverage on policies that they are not insured under.