Wednesday, November 6, 2013
In This Economy, These 2 Car Insurance Coverages Are More Important Than Ever
From more than 25 years of experience as a car accident lawyer, I have seen that, no matter what other car insurance coverages you choose, there are two that you absolutely must have. And they are even more critical now, in today's economy.I know, car insurance coverages can be confusing. And, probably because you don't really understand it, shopping for car insurance is one of your least favorite things. Well, I agree that this topic is boring and confusing and absolutely no fun to think about. But ignore it you shouldn't.Let me see if I can help.First, a quick refresher - Car Insurance 101. These are the main insurance coverages, and what they do for you...Liability- Pays what you owe because of injuries and property damage you cause.Uninsured Motorists (UM)- Pays you if you are injured by a driver who does not have insurance.Underinsured Motorists (UIM)- Pays you if you are injured by a driver with too little insurance to fully compensate you for your injuries.Personal Injury Protection (PIP)- This is the primary coverage in no-fault insurance states (there are 12 of those). It pays you your medical bills and loss of income after a car accident. In some states with fault insurance systems, it is offered as an optional coverage.Medical Payments (Med-Pay)- Pays you for medical bills incurred as a result of a car accident.Collision- Pays to repair your car if it is damaged in a collision with another car or an object.Comprehensive- Pays to repair your car if it is damaged as a result of specified causes other than a collision, such as theft, vandalism or accidental glass breakage.Towing- Pays you for the cost of towing your vehicle when it is disabled.Rental Reimbursement- Pays the cost of a temporary rental car while your car is being repaired.So, which 2 are absolutely essential?Liability InsuranceThe first is liability. If you cause a car accident, this coverage pays others that you harm. If you don't have this insurance, you have to pay for the harm that you cause out of your own pocket.This means that if you are daydreaming for a moment or briefly look at the dials on your car radio and don't see that the car in front of you has stopped...and you ram into it...you are responsible for paying for the damage that you caused. You have to pay to repair that car and you have to compensate anyone who is injured.That's why you have liability insurance, so you won't have to pay what could be a very large amount yourself. Up to your policy limit, your insurance company will pay for damage that you do and harms that you cause.This is a no-brainer, right? After all, isn't liability insurance required in every state?Almost. Forty-eight states require you to have liability insurance. (To find out which states do not require liability insurance, read to the end of this article.)So, don't be tempted, as many have been during the current economic problems, to cancel your car insurance and take your chances. It's not a good gamble.Not only should you keep your liability insurance coverage, but you should make sure that you have enough coverage.You want to make sure that any harm you cause is fully paid for, don't you? If you seriously harm another human being, don't you want to make sure that they are fully compensated? Isn't that simply the right thing to do? And, of course, this coverage protects you against having to pay a potentially large court judgment yourself.How much liability insurance you need varies depending on your circumstances. The state minimums are entirely too low. If you can afford it, I think you should have at least $100,000 of personal injury liability coverage and $50,000 of property damage liability insurance (this pays for cars and other property that you damage).Discuss the "how much" issue with an insurance agent you trust.Uninsured Motorists and Underinsured Motorists CoverageIf you are in a car accident that someone else causes, uninsured motorists coverage and its cousin, underinsured motorists coverage, could save you from a disaster.Remember, uninsured motorists is the coverage that pays you if someone without insurance harms you or your family, or damages your property. This includes hit-and-run drivers.Are you wondering why uninsured motorists coverage is so important if all drivers (except in those two as-of-yet unidentified states) are required to have liability insurance?It's because, even though the law of almost every state requires liability insurance, many drivers simply don't have it.According to an Insurance Research Council study, as of 2004, nearly 15% of all drivers on the road were uninsured. And in some states, including Mississippi, California and Arizona, roughly a quarter of drivers weren't insured!To make matters worse, it is estimated that several hundred thousand drivers have dropped their insurance in the past year as the jobless rate has climbed and the economy has tanked.In about half the states, uninsured motorists coverage is required. Even if it isn't, my advice is...get it!And get as much uninsured motorists coverage as you can afford. In many states you will be limited by the amount of liability insurance you have. That is, you will be able to purchase as much uninsured motorists coverage as you have liability coverage, but no more.In some states, uninsured motorists coverage also serves as underinsured motorists coverage. In other states, they are separate coverages. Underinsured motorists covers you if you or your family are harmed by someone who has insurance but doesn't have enough of it.For example, if someone causes an accident and your losses total $100,000 yet the driver who caused the accident only has $15,000 of liability insurance...and no assets of his own to pay you...you are out of luck unless you have underinsured motorists coverage. If you have this coverage, it pays what the other driver can't...up to your policy limit, of course.According to a recent article in the Wall Street Journal, adding uninsured and underinsured motorists coverages to your policy will raise your insurance premium by about 7 - 9%. Based on my experience, this is a small price to pay for this coverage which can save the day if you are clobbered by a financially irresponsible driver.In today's economy, with more and more drivers canceling or stripping their car insurance coverages to the minimum, it is critically important that you have uninsured and underinsured motorists coverage on your car insurance policy.I hope this makes car insurance coverages a little more clear.Oh...the answer to the question is that only New Hampshire and Wisconsin do not require car insurance. Instead, they require drivers to show proof of their financial ability to pay damages for liability.