Law Offices of Dale M. Kornreich – Insurance Policy Advice
Your Automobile Insurance Policy – Do You Really Understand It?
As a personal injury attorney with 30 years experience I am always amazed that the average person has basically no understanding of their various coverage’s under their own automobile insurance policy. I hear the statement frequently (always after an accident) “I thought I had full coverage.” No one (and I mean you) ever really looks at their auto insurance policy until after an accident. My hope is that this legal advisory will prompt you (frighten you) to look seriously at your auto insurance policy before (God forbid) that auto accident occurs. You will not be in “good hands” until you have done so, and like a “good neighbor, I’ll be there for you” to guide you through the complexities of your auto insurance policy.
When Does My Auto Insurance Policy Provide Coverage?
To begin, various portions of your auto insurance policy will provide you with coverage under the following facts: While driving your car, your neighbors car, your friends car, while riding in your car, while riding as a passenger in someone else’s car, while renting a car, while using a temporary substitute vehicle (while your car is being repaired). Furthermore, your auto insurance policy will also provide you with various coverage’s under these facts (which I bet you didn’t know): While riding your bicycle, skateboarding, walking, jogging, running, crossing the street, etc., as long as you are struck by a vehicle (lucky you) while performing these activities.
Types Of Coverages Available Under a Typical Auto Insurance Policy
Bodily injury liability coverage protects you and your assets if you are at fault for the accident and cause injury or death to another (in other words—you blew it). Most bodily injury liability policies are what are known as “split policies” e.g. 100/300 (one hundred/three hundred thousand dollars) of coverage. What it means is that the maximum amount that your insurance company will pay out in bodily injury claims per accident is $300,000. The maximum amount any one person injured in that accident can recover is $100,000. The other type of bodily injury liability policy is known as a “single limit policy.” For example if you had a single limit policy in the amount of $300,000, and you caused a serious injury accident, your insurance company could pay the injured person up to the limits of your policy, i.e. $300,000. A single limit policy provides you with better liability coverage for that serious injury accident (and thus, better protects your assets). Therefore, if you have a choice between a split policy of, for example, 100/300 or 250/500, you are actually better off with a single limit policy in the amount of $300,000 or $500,000. The way to fill the “gap” and provide extra protection (which most insurance companies offer), is to purchase an “excess” bodily injury liability policy that provides additional coverage up to $1,000,000 (one million dollars) or more. The excess insurance is over and above your primary split policy or primary single limit policy. It comes into play when the claim against you exceeds your primary insurance. Please note: The cost of an excess bodily injury insurance policy is approximately $150 to $200 per year. It is cheap!! It is well worth your peace of mind and added security to purchase the extra coverage.
Property damage liability covers you for damage caused to another vehicle when you are at fault for the accident. It also covers you for property damage caused to other objects such as hitting a highway sign, traffic light, fire hydrant, house, fence, guard-rails, etc. The problem I’ve noticed in my clients policies (thankfully they were not at fault for the accident), is that too many of them have property damage liability limits in the amount of $10,000 or $25,000. Have you noticed the price of automobiles nowadays? Your lucky if you can buy a good quality car for less than $25,000. What happens if you have $25,000 in property damage liability coverage and you total out a car worth $50,000 (or hit several cars in one accident)? Guess what (if you do not have that excess $1,000,000 liability policy which I discussed earlier—which would come into play), your insurance company pays $25,000, and you pay (from your own personal assets) the additional $25,000. Not a good deal! Therefore, if you do not have that excess liability policy to protect your assets, you had better have substantial property damage liability coverage.
Uninsured motorists coverage comes into play when the at fault motorist that caused the accident, (and your bodily injuries), has no insurance. That person is therefore “uninsured.”
Underinsured motorists coverage comes into play when the person that caused the accident (the at fault motorist again), has an inadequate amount of insurance to cover your bodily injuries sustained as a result of the accident. That person is therefore “underinsured.” When pursuing underinsured motorists coverage you must first exhaust the full amount of the at fault motorist’s liability insurance limits before you can then turn to your own insurance company for additional coverage (up to the limit of your uninsured/underinsured motorists policy). Your uninsured motorists coverage (as well as underinsured) provides you with past and future medical benefits, past and future wage loss, and past and future pain and suffering (general damages). Note: You cannot pursue uninsured/underinsured motorists’ recovery if you were at fault for the accident (i.e. caused your own injuries).
When you review your auto insurance policy you may not see the word “underinsured” alongside of “uninsured.” In the State of California the law requires that all uninsured motorists policies automatically include underinsured motorists coverage. Therefore, the term is sometimes not included. Unfortunately, a lot of insurance company policies do not spell this out very well.
This is important: Your uninsured/underinsured motorists’ coverage should be equal in amount to your bodily injury liability coverage. If you have 100/300 liability coverage your uninsured/underinsured motorists coverage should be 100/300. If you have 250/500 liability coverage your uninsured/underinsured motorists coverage should be 250/500. Never, never settle for anything less. THIS COVERAGE PROTECTS YOU! There are so many uninsured motorists in the State of California (probably 30%) that you need uninsured motorists coverage to protect you and your family. There are also too many motorist out there (and I could tell you lots of painful stories), who do not carry enough insurance to cover the damages they’ve created. Therefore the need for a large underinsured motorists’ policy. Do not let your insurance company or your insurance agent convince you to “waive” uninsured/underinsured motorists coverage (to save a few bucks), or to accept an uninsured/underinsured limit at less than your bodily injury liability limits. A lot of insurance companies try to limit their potential exposure by only writing 15/30 or 25/50 or 30/60 uninsured/underinsured motorist’s coverage. If they won’t write uninsured/underinsured motorists limits equal to your primary bodily injury liability limits, it’s time to find a new insurance company—there are others that will. Note: I believe just about all insurance companies will only write uninsured and underinsured motorists coverage equal to your primary bodily injury liability policy limits. In addition, most “excess” insurance policies only apply to “liability” exposure and do not provide any further coverage for uninsured/underinsured motorists’ exposure. If the “excess” policy does offer uninsured/underinsured motorists excess coverage, by all means accept it!
Medical pay benefits are no fault benefits provided by your own automobile insurance policy (in other words it doesn’t matter who was at fault for the accident—it pays automatically).
A certain number of people have asked why they should even bother to have medical pay coverage when they already have group health insurance to cover their medical bills. Good question. The answer—most group health insurance policies have “deductibles” and “co-payments.” Your medical pay benefits will give you the money you need to cover your deductibles and co-payments. The absolute last thing you need to worry about after an accident is how you are going to pay your medical bills. Furthermore, with so many of us insured under restrictive “HMO” policies—your medical pay benefits allow you to see any doctor you so choose. No primary doctor to say “yea” or “nay.” The only requirement for payment under your medical pay coverage is that the medical care must be reasonable and necessary (and the doctor cannot overcharge—or his/her medical bill is reduced). Your medical pay policy will pay for all medical bills incurred as a result of an accident. The policy time period is usually from one to three years. You will have to look at your own specific policy to note the actual length of medical pay coverage. It is my recommendation that you have at least $5,000 in medical pay coverage. Some insurance companies will write coverage up to $100,000. Please note: That medical pay only covers those persons in your car at the time of the accident. If you have a $5,000 medical pay policy and there are (for example) four people in your car at the time of the accident, and they are all injured, then all four have available to them $5,000 in medical pay benefits. Your $5,000 medical pay policy isn’t split four ways, it’s multiplied!
If your insurance company pays out under your medical pay coverage, and you recover against the party that caused the accident, most insurance companies require that you reimburse them for the medical payments made (this is known as a third party lien). However, the lien can be reduced or even waived if the recovery had is inadequate, or if liability is disputed (also a reduction occurs based upon attorney fees).
The one part of the auto insurance policy that most of my clients seem to understand quite well is their collision and comprehensive coverage. Under collision & comprehensive coverage the most difficult part initially is deciding what deductible you want (what portion of the damage responsibility you’re willing to accept). Deductibles range from $100 to $2,000. I recommend a $100 deductible under comprehensive and a $250 deductible under collision. I also recommend (for a few dollars more), that you purchase uninsured collision deductible waiver coverage to cover you if you are hit by an “at fault” uninsured motorists. (The waiver does not apply if you are at fault.) All collision & comprehensive policies are “no fault” type coverage.
Comprehensive coverage covers your car for any damage caused to it by anything other than an automobile accident. For example, hailstones, windstorms, errant golf balls, baseballs, rocks, falling trees/branches, hitting a deer, cow, horse, or any large animal, closing the garage door on your opened rear window and smashing it (I’ve done this) etc., etc..
Collision coverage covers you for any automobile accident wherein you sustain damage to your vehicle. Under collision coverage your insurance company has the option of repairing your vehicle or totaling your vehicle, whichever is less. If your vehicle is totaled, you will be paid the fair market value of your vehicle at the time of the accident, plus taxes on the totaled amount, and any un-used D.M.V. license/registration fees (less your deductible).
Uninsured motorist’s property damage coverage provides up to $3,500 maximum coverage on older and less valuable vehicles wherein you do not want to purchase collision coverage. Note: Collision coverage is of course, much more expensive. In order to collect under uninsured motorist’s property damage coverage you must be hit by an uninsured motorist, and you must not be at fault for the accident. If your car is worth $5,000 and it is totaled in the accident the maximum you will recover is $3,500.
Automobile rental coverage is no fault coverage under your automobile insurance policy. I strongly recommend that you purchase rental coverage. If you are involved in an accident with an uninsured motorist, or if you are at fault for an accident, you’ll regret the day that you never purchased rental coverage. It usually takes forever for repair shops to repair your vehicle. If you do not have access to a second vehicle, or if you cannot afford to rent a car, what will you do? Rental cars are expensive! Most insurance policies state they’ll only pay $20 to $35 per day for a rental vehicle. Also, most insurance policies (unfortunately) will only pay for a rental vehicle up to 30 days. Certain car rental companies have sweetheart deals with insurance companies that enable you to rent a nice car for the $20 to $35 per day benefit provided. If your car takes longer than 30 days to repair—your on your own come the 31st day. There are a few insurance companies that will write rental policies longer than 30 days. Obviously, if you are involved in an accident with an “at fault person” who has insurance, it would be best to run your rental vehicle through that persons insurance company. Then there is no time limit on your retention of the rental car (other than when your car is finally repaired). I have seen severely damaged cars take two to three months to repair with car rental bills approaching $2,000 to $3,000.
The last part of most insurance policies is the towing coverage. This coverage is very inexpensive. I have never personally purchased towing coverage inasmuch as I have always had AAA (Automobile Club of Southern California). However, if I did not have AAA I would definitely buy the towing coverage. Furthermore, towing coverage under your auto insurance policy cost a lot less than AAA’s policy. However, I’m a man of tradition. If you do have towing coverage under your auto insurance policy, and your vehicle needs to be towed, you would first have to pay the bill yourself, and then seek reimbursement from your own auto insurance company. Perhaps that is the reason why I stay with AAA. Who wants to worry about reimbursement!!
I trust the above will help give you a simplistic over-view of your automobile insurance policy and the various types of coverage’s. If you have any questions in the above regard, please feel free to telephone me at anytime. My advice and wisdom over the telephone is always free.
Dale M. Kornreich
Attorney at Law