Understanding your auto insurance coverage

Finding out what kind of car insurance you have and what specific coverage you have AFTER a car accident is generally not a good idea.  However, that being said, it’s amazing to me how many clients I have who haven’t the foggiest idea what kind of coverage they have.  Many of them tell me the same thing – “Oh, I have full coverage.”  When I start to ask specifics, they give me the “deer in the headlights” look. 
 
Auto insurance is hardly an exciting topic.  However, you really should take a moment to review your policy to understand what aspects of coverage you actually have and what limitations there might be.  It’s one thing to know you “have” car insurance, but an entirely different matter to actually understand what you have.
 
Here's a quick overview that may help you better understand what coverage you have:
 
Bodily injury liability covers you if you cause injury to another person due to a car accident.  In California, liability coverage is required by law (known as “financial responsibility” laws).  The minimum coverage is currently $15,000 which isn’t very much if you should do serious harm to another person.  How much liability insurance you obtain should be partially based on the monthly premium but you should also assess how much risk you are taking if you’re not getting enough coverage.  If your negligence puts a young child in a wheelchair for the rest of his life, do you really think his family will simply take your $15,000 policy and leave you alone? 
 
You will also have property damage insurance to cover property damage causes to other vehicles.  However, if you have a minimal policy, it may not be enough to cover damage to an expensive vehicle or if you cause damage to several vehicles. Again, be careful to obtain enough coverage.  Consult with your insurance professional.
 
Remember bodily injury liability coverage protects other people, not your car. Therefore, it's a good idea to make sure you have property damage coverage to protect your car as well.  We will discuss that in a few moments.
 
Medical Payments Coverage (MPC) usually pays your medical expenses and for the medical expenses of any passengers in your car.  Basically, think of medical payments coverage as extra health insurance available to your under your auto policy. You probably don’t even know if you have it. In some cases, it can serve as “primary” coverage (you can use it right away) and in other cases, it might be considered “secondary” coverage (you can use it only if you don’t have health care insurance or you’ve exhausted your other available resources). Make sure you know which type you have before you go off running up medical bills.
 
Uninsured Motorist Coverage (UM) covers you if you get injured by someone who didn’t have auto insurance.  Why wouldn’t someone have auto insurance?  Well, maybe they didn’t buy it.  Maybe they didn’t pay their premiums and their coverage lapsed.  Maybe they were conducting a commercial endeavor while driving a personal vehicle.  Maybe they are an excluded driver on a particular policy.  Just because someone presents you with their insurance card at the scene of an accident doesn’t necessarily mean they had insurance.  This type of coverage only covers you for injuries (not for property damage), so you should ask your insurance company if you are coverage for property damage as well.
 
You should also know that in most cases, “uninsured motorist coverage” is equivalent to “underinsured motorist coverage” (UIM) which applies when the other party has insurance but it wasn’t enough insurance. 
 
So let’s assume you have a $100,000 UM/UIM policy.  If you are injured, and the other party has NO insurance, you have the entire $100,000 available to you.  If you are injured and the other party only had $15,000 of insurance, that means you have another $85,000 available to you assuming you accept the $15,000 from the other party.  Just because the benefit is “available” to you doesn’t necessarily mean your insurance company is going to pay it without proof of injury that merits payment beyond what you received from the responsible party. So if your case is worth $25,000 (assuming a fair assessment of your claim) and you got $15,000 from the responsible party, you would request an additional $10,000 from your UIM policy which would get you to a total of $25,000.
 
Comprehensive Coverage covers damage to your car if it is stolen, damaged by flood, fire or damaged by animals (such as hitting a deer while driving!). Basically, “comprehensive” means “comprehensive.” 
 
Collision Coverage pays for damage done to your car if you’re involved in an accident with another vehicle or an object such as a pole. If you don’t have this coverage, your only chance to fix your car will be to pursue the insurance of the other person’s vehicle (assuming that person is responsible for the accident and he/she and their insurance companies agrees to it).  Sometimes, you will think the other person is responsible (or perhaps they even apologized at the scene), but then they change their mind or their insurance company disagrees.  If that is the case, then you will have fewer options since you can’t turn to your own insurance company to fix your car unless you have collision coverage.  If your vehicle isn't worth very much, then getting collision coverage may not be the best idea.  However, if you're out several thousand dollars after an accident, you might be wish you had it!
 
Rental Car Coverage provides you with a rental car if your vehicle is damaged in a car accident.  This can come in quite handy if the other party had no insurance or if the responsible party’s insurance company is taking forever and a day to “investigate” the accident before admitting to liability.  Sometimes you don’t have the luxury of time. However, even if you have rental car coverage, be careful not to exceed the maximum amounts allowed.  Your insurance company should make it clear to you what they cover and what they won't cover.  Don't go renting an expensive Mercedes Benz for 3 months and expect your company to automatically pay for it.
 
Discuss these issues with your insurance broker and make sure you not only “have” insurance coverage, but more importantly, you actually understand exactly what you have and what you don’t have.  If you've been injured in a serious auto accident, call our office at (661) 414-7100 to see if we can help.