Do you have enough auto insurance coverage?

Imagine you are getting ready to leave your house and you open the door and the rain pours down. Now you start looking frantically for your umbrella… ah, there it is! You go outside, open your umbrella and now you are protected from that torrential rain. If it were a bright sunny day with no rain in sight, you probably wouldn’t even care where your umbrella is or if you had one. The same goes for insurance. Until you need it, do you really care? Unfortunately, too many people realize they have insufficient coverage only when an unexpected incident occurs and they have to file a claim with their insurance company.

So a logical starting point in determining if you have the right insurance coverage is to understand the basics. To ensure you have the right coverage, you must first gain a good understanding of the basics of auto, home, personal and life insurance coverage. For this article, we will focus on auto insurance coverage.

Car insurance basically covers you for liability and property damage when it comes to your motor vehicle. There are other optional areas of coverage as well, but for our discussion let’s focus on the basics, which are the most important anyway. The first and/or second page of your auto insurance policy are your auto insurance policy declaration pages. The declaration pages describe your auto coverage limits in numerical dollar values.

Here’s a sample of what you might see on your auto insurance policy’s declaration pages:

-Bodily Injury/Property (BIPD) 250/500/100
-Limited or Unlimited
-Medical (Med) $5,000
-Personal Injury Protection (PIP) 250w/250Ded
-Uninsured/Underinsured (UM/UIM) 250/500/100
– Collision $500 (Coll) Deductible
-Comprehensive (Comp) $500 Deductible
-Rental Insurance (RI) 80%/1500

Let’s take a look at each of these definitions and coverage amounts in more detail.

The BIPD stands for Bodily Injury (BI)/Property Damage (PD). Basically, in the example above, this individual insured has liability protection of $250,000 per individual or a maximum of $500,000 per incident, plus $100,000 in property damage to the other party’s vehicle in a collision. Liability coverage is protection for times when you have been found and proven negligible in an auto accident and therefore become legally liable for the resulting compensatory and/or punitive damages to the other party or parties. The BI, from the BIPD, will cover you for negligence on your part that results in bodily injury to the other party or parties. BI also covers the cost of attorneys’ fees associated with any litigation brought against you by the other party. In the example above, this person has $250,000 in liability coverage and attorney’s fees per person injured or $500,000 for the entire incident.

The PD, from the BIPD, covers damage to the other party’s vehicle as a result of your negligence; therefore, in the example above, up to $100,000 in property damage to the vehicle or the property of the other party. Now, being aware of the litigious society we live in, we wonder if $250,000 per person or $500,000 per incident is enough BI coverage. This is a personal decision for each individual to make based on their current assets and net worth, and their knowledge of recent jury decisions and awards in BI cases. An important factor affecting this decision is the understanding that you are self-insured for any amounts awarded in excess of your BI coverage amount, should the jury award compensatory and punitive damages greater than your BI coverage amount. So, in this example, if the jury awards $750,000 to the person driving the other vehicle who suffered bodily injuries because you collided with them as a result of their negligence, then you are self-insured for the amount that exceeds the $250,000 that is the case in this case. It would be $500,000. If you do not have the $500,000 to settle the award, then the judge has many other options to secure restitution to the injured party, such as: garnishing your wages, selling some of your assets, placing a lien on your property, etc. Now, you can get an umbrella policy that covers you up to a certain amount in excess of your underlying auto BI coverage. We will see how a general policy works in more detail in a future article.

Next, we have “limited right to sue” vs. “unlimited right to sue” coverage. Basically, under the “limited” right to sue lawsuit option, you agree not to sue the person who caused the car accident for your pain and suffering unless you suffer one of the permanent injuries listed below:

-Loss of a body part.
-Significant disfigurement or scarring
-A displaced fracture
-Loss of a fetus
-Permanent injury
-Death

Please note that choosing this option does not give up your right to sue for economic damages, such as medical expenses and lost wages.

Under the “Unlimited” right to sue trial option, you retain the right to sue the person who caused a car accident for pain and suffering for any injury. Most people will choose the “limited” option because it is much less expensive and provides the ability to sue the negligent party for most serious and permanent injuries. However, many attorneys will generally choose the “unlimited option” for their own personal coverage and pay the significant additional cost because they want the right to sue for any injury.

PIP Coverage stands for Personal Injury Protection Coverage. The PIP is paid with its own policy. PIP covers medical expenses and possibly lost wages and other damages. PIP is sometimes called “no-fault” coverage, because the statutes that enacted it are generally known as no-fault laws. PIP is designed to be paid without regard to “fault”, or more correctly, without regard to legal liability. PIP is also called “no-fault” because, by definition, a claimant’s or insured’s insurance premium should not increase because of a PIP claim. Your insurance may subrogate in a PIP claim against the other party’s insurance company if the other party is found to be the negligent party in the accident. PIP is mandatory coverage in some states.

Uninsured/Underinsured (UM/UIM) is coverage under your policy that can pay for injuries suffered by you and your passengers, and possibly damage to your property, when the other driver is legally responsible as a result of a car accident of the accident and determined as “uninsured” or “underinsured”.

An uninsured motorist is a person who does not have automobile insurance coverage, or had insurance that did not meet the state’s minimum liability requirements, or whose insurance company denied their claim or was unable to pay for it financially. In most states, a hit-and-run driver is also considered an uninsured driver for purposes of paying for injuries suffered by you or your passengers.

An underinsured driver is a person who had insurance that met the minimum legal requirements, but did not have coverage limits high enough to pay for damages caused by the accident. In these situations, UIM coverage may pay for your damages. It is important to note that uninsured and underinsured are separate coverages, although in many states they can or must be purchased together. Some states require the purchase of UM/UIM, but many do not.

Collision coverage insures you for damage to your vehicle. It doesn’t matter if it’s a collision between your car and another car, or your car and a stone wall. You are covered if your car sustains damage as a result of hitting something or if something runs into you, whether or not you are at fault. Generally, your deductible will apply. If you collide with another vehicle and the other party is at fault, then your insurance company may subrogate in the claim against the at-fault party’s insurance company to recover the claim amount.

Comprehensive (Comp) basically covers what collision coverage does not. When your car sustains damage that was not the result of colliding with another motor vehicle or object, the full portion of your policy will pay for the damage. If you do not have comprehensive coverage, you will have to pay out of pocket for any damage to your vehicle that is not related to a collision. These are the perils that comprehensive auto insurance coverage typically covers: fire, theft, vandalism, broken or damaged glass, damage caused by animals, falling objects, storms (hail, wind, etc.), and water damage. . Generally, your deductible will apply.

Rental Insurance (RI) is coverage for you to rent a car while your vehicle is being repaired due to a covered incident. In the above example of the values ​​on the declaration page, 80%/1500 means you have coverage of $80 per day and a maximum total cost of $1,500 to rent a car while your vehicle is being repaired. This is an optional coverage that many people take, but some don’t.

Well that’s it! That’s the basics of understanding your auto insurance coverage. It’s not that bad, is it? Now that you understand the basics of auto insurance coverage, you can review and analyze the coverage information on the declaration page of your personal auto insurance policy while considering your personal finances to determine whether or not you have enough coverage. .

Stay tuned for future articles that will explain the basics of understanding life, personal, and homeowners insurance coverage. You never know when it’s going to rain!

Jose Rubino, Agent
NJ Licensed Property and Accident, Health and Life