What car insurance does, and What you are really buying
When you purchase automobile insurance, you are purchasing peace of mind and a level of financial security. If you are concerned about losing your assets you may be interested in purchasing insurance. Recently, I went to a new insurance company and updated my own coverage. You know, as a Car Accident Lawyer, we have a different perspective than others and during that process, it occurred to me that a basic explanation of the options and levels of coverage that insurance companies offer might be helpful to those who are thinking about purchasing or updating their car insurance.
INSURANCE COVERAGE OPTIONS:
If you call an auto insurance agent today and tell them that you would like to purchase insurance for your car, you will be struck by just how many different options are available. Do you want collision coverage or just basic liability? How much liability coverage do you want-basic or higher limits of coverage? Do you want Med Pay? How much Med Pay do you want? How about uninsured motorist coverage? What about an umbrella policy?
Decision #1: Liability Only, Or Full Coverage:
The basic insurance that every car owner in Utah is required to carry, at the very minimum, is a 25K/50K liability policy. That means that if you crash into someone, your insurance company will pay no more than $25,000 per person, and no more than $50,000 per accident for the physical injuries, medical bills, wage loss, and emotional suffering to the people that your careless driving hurt. This minimum coverage also pays no more than $15,000 for all property damage that you cause as the at-fault driver.
So what happens if you have a minimum limits policy and your bad driving kills someone on the road? This is a great example of when your insurance may be exhausted and you still might be looking at many hundreds of thousands of dollars of personal liability. There is nothing wrong with purchasing only liability coverage at the minimum limit. However, this type of coverage is not appropriate if you make good money, have assets, or are not prepared to declare bankruptcy in the event that you really injure someone in a crash.
Another coverage option that you can purchase in addition to liability is collision coverage (“full coverage”). The only benefit collision coverage adds to your policy is the ability to get your own car repaired or replaced, even if you cause the crash. If you have a nice car, and you are not okay with driving around with dents and dings on your vehicle, collision coverage is really important. Collision coverage will also pay to repair your vehicle if a deer jumps in front of your car, if you park your car and it gets hit, or if you inexplicably smash your car into a tree or light post.
If you are not at fault for the crash, you do not need to look to collision coverage to pay for the damage to your car. The at-fault driver’s insurance will have to pay. But with collision coverage on your policy, if you don’t like what the at fault driver’s insurance wants to pay for your car damage, you can always have your insurance company repair your vehicle through your collision coverage. Clearly, having collision coverage is for anyone who has a newer vehicle that he would want to repair if it was damaged in a car accident.
Decision #2: Limits of Liability:
When you are choosing the liability limits of your insurance policy, this is not the time to go cheap. When you are asked how much liability coverage you want, the real question is how much protection you need from people who sue you if you injure them in an accident. Again, the amount of liability coverage that you need is determined by what you have as far as assets, money, good job, etc. For example, a millionaire should be looking for a million dollars or more in liability coverage limits. A young college student needs nowhere close to that amount of coverage. A basic 25/50 policy would probably be fine. When that student graduates, gets a job, a wife, a baby, and a mortgage, changing over to higher liability coverage limits would probably be in order.
Think of it this way. Assume you are driving down the road and you get an important call on your cell phone. While trying to answer your phone, you strike and severely injure a pedestrian in a cross walk. When I get hired by that injured pedestrian whose injuries now prevent her from working, I will be looking to determine the extent of my client’s current and future medical needs and past and future wage loss. I will then compare those figures against the limits of your liability coverage. If my client’s medical needs are greater than your coverage limits, I will have to make a decision as to whether I’m going to accept a settlement with your insurance company for the limits of your coverage, OR decide to take you to court in the hopes of reaching beyond your insurance coverage limits to take your personal assets. So, if you have low coverage limits, but have a house with equity, cars you own outright, savings accounts, or a good job where I can garnish your wages, then I may decide not to take what your insurance company is willing to pay and instead pursue you in excess of your coverage limits.
Consequently, you should try to purchase liability coverage that is equal to or better than your own financial picture. Beyond basic 25/50 coverage, insurance companies nearly always offer 50/100, 100/300, and 250/500 coverage limits. Remember, the first number signifies how much your insurance company will pay to any injured person looking to come after you for your bad driving, and the second figure is the total amount that they will pay regardless of how many people you hurt in your crash.
Many insurance companies offer one million dollars of liability coverage. Professionals with houses, cars, and good jobs should strongly consider such higher limits of coverage. Again, the higher your liability coverage limits are, the more likely the people that you injure in a car accident will limit their demand for injury compensation to the limits of your liability coverage. In other words, having a lower liability coverage limit increases your risk of personal liability if you are involved in an accident. Conversely, having a higher liability coverage limit reduces the risk of personal liability.
Decision #3: Uninsured/ Underinsured Coverage
Studies show that 15-25% of all drivers on the road are uninsured. Regardless of how much liability insurance you have, if you don’t purchase uninsured motorist coverage, and you are injured by an uninsured driver, no one will be there to compensate you for your injuries and losses. Beyond the population that is completely uninsured, most drivers on the road are underinsured. Purchasing uninsured coverage gives you the ability to look to your insurance company to compensate you for your injuries that are caused by at-fault uninsured and underinsured drivers.
As a basic rule, whatever level of liability coverage you have, you should consider the same amount of coverage to protect you against uninsured and underinsured drivers. So if you decide you need 250/500 liability coverage, you get 250/500 uninsured motorist coverage for the same reasons. It tends to be rather cheap coverage and invaluable if you are hurt by a careless driver.
Decision #4: How About Umbrella Coverage?
Insurance companies also sell a product called umbrella coverage. These are generally affordable secondary policies that protect you up to another million dollars beyond any other policy that you might have in place. For less than a couple hundred dollars a year, you can add an umbrella policy to your car insurance coverage to protect you from personal liability for injuries that you cause to others that might exceed your current coverage limits. Additionally, some insurance companies sell umbrella policies that can be used as secondary uninsured/underinsured motorist coverage. If you are injured, these umbrella policies, along with your uninsured motorist coverage, can afford you high levels of potential insurance coverage.
Because the cost of umbrella coverage is so reasonable, and because they provide such complete and massive coverage, any professional with assets and obligations, mortgages, children, a good job, etc. should strongly consider adding this coverage to their existing coverage if possible.
Free Consultation with Car Accident Lawyer
If you’ve been injured in a vehicle accident, you need to protect your rights. c Call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506