PROTECTING THE CONSUMER

PURCHASING AUTOMOBILE INSURANCE FROM A LEGAL PERSPECTIVE

As an attorney who routinely practices in the personal injury field, I make it a habit to inquire about my clients’ automobile insurance policy in order to see whether or not they are adequately insured should they be involved in an automobile accident. I all too often hear the typical response from my client, “Oh, I’m fully covered.” However, I have found from experience that most people are far from being “fully covered, and in fact, are extremely vulnerable.

When I examine a client’s insurance needs, I always look at a “bad case scenario,” that is, what will happen to my client if they are at fault for a major accident, causing major bodily injury and property damage. I also ask what will happen to that same client if they and/or their passengers are severely injured by a driver who carries inadequate or no insurance.

The following represents the most common types of automobile insurance sold, with discussions about how much of each type of insurance you should purchase. Please be aware that not all insurance companies offer all of these types of insurance, but to be “fully covered” you should buy each of the following:

1. LIABILITY – Liability insurance insures you for bodily injury to others and/or property damage if you are at fault in an accident. California law requires all California drivers to carry at least $15,000 worth of liability insurance. If you are in an accident and did not carry liability insurance, you may lose your driver’s license!

A. Bodily Injury Liability – The minimum policy sold is commonly referred to as a “15/30” policy, meaning the most your insurance company may have to pay an injured party in an automobile accident is $15,000 per person, or $30,000 per accident. Should a judgment be rendered against you in excess of the policy limits, the injured party may collect the difference from you directly.

Thus, it is important to carry as much of this type of insurance as you can afford. A “25/50” or “30/60” is the minimum you should buy. If you own real property, you should carry no less than a “50/100” policy, and optimally should carry a “100/300” policy. “Umbrella” policies with even higher limits of liability insurance are also available.

B. Property Damage Liability – With the price of automobiles today, the more insurance you buy the safer you are. Minimally, you should purchase a $50,000 policy, which could cover the price of an average Mercedes.

2. MEDICAL PAYMENT (MED PAY) – Covers medical expenses for you and/or your passengers regardless of who is at fault. Since medical costs are extremely high, you should carry as much as possible. Most insurance companies offer at least $1,000 Med Pay coverage, and some offer as much as $100,000. The difference in cost between, say, $5,000 and $10,000 worth of insurance is inexpensive, and certainly worth the extra money.

3. UNINSURED MOTORIST – Usually sold in the same amounts as your liability insurance limits, Uninsured Motorist pays you and your passengers for bodily injury arising from an accident with a motorist who caused the accident and who does not carry liability insurance. The sad reality is that a very large percentage of California drivers illegally drive without liability insurance. Since this insurance is for YOUR direct benefit, purchase as much as you can afford.

4. UNDERINSURED MOTORIST – Incorporated into your uninsured motorist coverage is underinsured motorist. Your insurance company will pay for your bodily injuries when the responsible party’s insurance is inadequate to fully compensate you for your injuries. What is important to know is that your insurance company will only pay the difference between what the responsible party’s insurance company has paid, and what your injury commands. To be effective, your uninsured motorist coverage must be more that the responsible party’s liability insurance coverage, which means that for Underinsured Motorist to be effective, you must carry more than a minimal “15/30” policy.

5. COLLISION – Should your vehicle become damaged in an accident, regardless of who is at fault, your insurance company will repair your vehicle to its condition prior to the accident. However, your insurance company is not obligated to repair your vehicle when the damage to the vehicle exceeds its value. If the repairs will exceed the value, the insurance company must compensate you for the reasonable value of the vehicle only, and not the costs of repairs. The larger the deductible, the less expensive the insurance.

6. COMPREHENSIVE – If your vehicle becomes damaged from a cause other than a collision, your insurance company will pay for its repairs, or its reasonable value should the repairs exceed its value. This important type of insurance covers losses due to theft, fire, vandalism, acts of god, hitting animals or objects, falling objects, and other non-collision types of incidents. Again, the larger the deductible, the less expensive the insurance.

7. EMERGENCY ROAD SERVICE – This coverage typically includes towing from the scene of an accident or after striking an object, or if your vehicle is stuck and needs towing or servicing. This insurance is very inexpensive (usually under $10.00 per year), but can be a “life saver.”

8. RENTAL VEHICLE AND TRAVEL – Covers you when you need to rent a car or pay extra travel expenses because of damage to your vehicle. Rental cars today are very costly and repairs to your vehicle can take weeks or months. This insurance is also very inexpensive (usually under $25.00 per year) and well worth its cost. Ask for higher rental coverage, if available, for even more protection at a very low cost difference.

9. UNINSURED MOTOR VEHICLE PROPERTY DAMAGE – This insurance takes effect when your vehicle is damaged by an uninsured motorist. Since this is similar to Collision, in effect, this insurance will cover the deductible you must pay under Collision. For about $5.00 per year, this is very good insurance.

To be “fully covered” you must carry a wide variety of insurance types with adequate “limits,” or the maximum dollar amount the insurance company will pay under each type of insurance. The types of insurance you should carry are fairly standard, but the limits you carry should be tailored to your particular needs and possible legal responsibilities in the event of an accident.

Most insurance agents will be happy to explain all available types of insurance, and quote you prices according to the limits you choose to purchase. In addition, your attorney can advise you as to your rights and possible exposures by having or not having certain types and amounts of insurance. Many attorneys offer complimentary insurance evaluations for new and existing clients.

Like any other product, know what you are buying, and buy wisely.