“How Much is my Insurance?” Is Probably the Wrong Question.

Every day my eyes and ears are assaulted by Emus, talking Geckos, and various B-List celebrities extolling the virtues of cut-rate insurance.  SAVE SAVE SAVE! They all say, in an attempt to get you to switch your auto, home, etc., insurance to their company.   Saving money is great.  I love to save money, although I seldom seem to have the opportunity as my car randomly jettisons parts, my house slowly disintegrates, and my kids are going through food and clothes like the First Marine Division.  That said, if I am seeing a physician, a tax advisor, or some other professional, usually my first question is “what can you do to help me” rather than “how cheap are  you”.  With insurance, you should be thinking the same thing.

I’m not suggesting that you should pay whatever a given insurance company asks for, but you should at least be educated about what you are purchasing, and why.  Here are a few tips to get the most out of your insurance coverage.  Today, I’ll cover some basics of Auto Coverage.  Homeowner’s and Umbrella Coverage I will take on in an upcoming article:

In Kentucky, we are required to have liability insurance to operate our cars on the road.  If you are pulled over and have no insurance, you have just treated yourself to hefty fines and you can potentially lose your license to drive.  So, don’t do that.  Moreover, if you seriously injure someone and have no coverage, that person will likely sue you for it, which will at a minimum force you to pay out of pocket for his or her damages.  This often results in bankruptcy, loss of assets, and generally a very, very bad time.  So, don’t do that, either.  Buy some insurance and follow the law.

What insurance should you buy?  Well, the law requires a minimum of $25,000 per person/$50,000 per accident of bodily injury coverage, and $25,000 of property damage coverage.  This pays the other guy/gal in the event you cause a collision.  (See KRS 304.39-110).  You will by default be offered Basic Reparations Benefits Coverage, known by the insurance industry as “Personal Injury Protection” or PIP for short.  PIP is applied to your auto (but not motorcycle!!) policy automatically unless you reject it in writing.  This pays the first $10,000 (or more if you purchase added PIP benefits) of your accident-related medical bills, and can also pay lost wages or replacement services while you are injured (subject to limitations).  This is a great benefit, because it means that if you are injured in an accident, you should have at least $10,000 to pay for your treatment, without having to worry about who was at fault for the accident.  

So, Liability insurance protects you if you injure someone else or damage their property.  PIP pays you if you are injured in a collision.  So how much is enough?  I think I speak for a lot of attorneys when I say that $25,000 in liability coverage doesn’t get you very far.  Modern cars are expensive, and medical bills, even for just one ER visit, can easily max out a minimum-limits policy.  

But Joooooonnathan, the insurance lady on the phone said I had FULL COVERAGE! You might say.  OK, so, what does that mean?  Do you know?  It probably doesn’t mean what you think it means.  Full Coverage is insurance jargon that means you have purchased (probably) PIP, Liability, Comprehensive, and Collision of at least the minimum limits.  Comprehensive covers incidental property damage type losses to your vehicle.  Policies vary on what is covered and what isn’t and be aware that these policies are littered with exclusions.  Collision covers accident-related damage to your car, again to varying degrees and subject to a whole smorgasbord of exceptions.  Full Coverage has nothing to do with your Limits.  Limits are how much money the insurance company will pay on a given claim.  Once they pay their limits, the insurance company is out of the picture, and it is all on you.  

So, look into buying higher liability limits.  Look into adding to your PIP benefits, especially if you have less-than-stellar medical insurance.  Actually READ your policy to see what the mythical comprehensive and collision policies cover, and what they don’t.  Remember that you are purchasing peace of mind, that if something bad happens, it isn’t going to result in financial ruin for you.  That, at least to me, is worth a lot.

Another thing that insurance companies offer, but don’t often talk about, is uninsured or underinsured motorist benefits.  These benefits will pay your damages if you are injured by someone who either had no insurance, or had insufficient insurance and assets to pay your damages.  This benefit isn’t expensive, even for motorcycles, and it can be a life-saver.  

Once upon a time I represented a couple who were driving home from church when they were struck by a sixteen year old in his souped-up muscle car.  Their car was mangled, and they were both very seriously injured. The teenager (who miraculously was not seriously injured) had only minimum liability limits on his insurance.  The airlift bill alone for my clients was well into the six figures.  So, I had catastrophically injured clients and no insurance money to direct to their months-long recovery costs.  It was a terrible, terrible situation.  Now, had my clients purchased Underinsured Motorists Coverage, that would have stepped in to pay their bills after the teenager’s policy limits were tapped out.  It would have helped them pay their bills, keep their lights on, and keep their kids fed while they recovered.  

So, in conclusion, buy quality insurance and READ YOUR POLICY to know what you are purchasing.  Buy more than enough insurance to cover what you can’t afford to lose.  Remember that by the time you need it, it will be too late otherwise.  Don’t rely on a lizard or a flightless bird to give you good insurance advice.  If you have questions, Spencer Law Group is here to help and we’re happy to talk to you.  Give us a call. 

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