When I sign up a new client injured from a car crash, one of the first questions I ask is: “Tell me about your own car insurance coverage…..” I’m never surprised when a client responds: “I’m fully covered.” The problem is this is a fairly meaningless statement.
Do you know about your car insurance coverage? It’s really important and you should. So, let’s break it down in easy language. Insurance in Florida is complicated and really boring, so this will be a challenge to make it readable and hopefully interesting.
Let’s start with this: When you have a policy of car insurance, you have as many as six different types of coverage. So to say you’re “fully covered” means that you have every option of insurance and at the highest limits of liability. Very few actually have that.
What’s the most important coverage to have of the six? No doubt in my mind, you need Uninsured Motorist Benefits, also known as “UM” or “UIM” (for “underinsured motorist”). This is the most important insurance coverage to have because Florida has so many uninsured people driving around and this insurance covers you in case you’re in a car wreck that wasn’t your fault and the other guy didn’t have any insurance or enough insurance to compensate you for your injuries.
I’ve seen plenty of potential clients with bad injuries who had nowhere to go with their claim because the party that hit them had no insurance and the client had no UM. In short, UM will pay you when you have sustained a permanent injury, and the at-fault driver had no or insufficient insurance.
One more important thing about UM is, it can be waived. You don’t have to have it. Some insurance company agents will even encourage you to waive it to save some money on premiums. Don’t do it. If you have to have insurance to cover the other driver in case you were at fault, why wouldn’t you cover yourself? Always protect yourself.
So what is this so-called “No Fault” Insurance? This brings us to the second type of car insurance – Personal Injury Protection, or “PIP”. If you have car insurance, you have PIP. It’s mandatory. PIP will pay your medical bills up to $10,000 if you were injured in a car crash, regardless of who was at fault. That’s the “no fault” party – regardless of who caused the crash, your car insurance will always pay for your medical bills.
I’m often asked, “Why should my company pay for my medical bills when HE caused the crash?” There’s no real good answer to that, just know that if your company pays for your medical bills for a crash that wasn’t your fault, fear not. Your car insurance company will not increase your premiums – they’d much rather have you continue as an insured. Now the exception to this is if you’ve had a number of insurance claims in the past – fender benders, broken glass claim, etc., this claim may result in your cancellation, but you’d still be covered for this incident.
Very important about PIP: There are laws that require you to get medical care within time limits after your car crash. This is too complicated to go into in this post, but, in brief, if you’re in a car crash, see a medical professional within two (2) weeks or else your PIP may not pay for later medical care.
But remember, “PIP is always primary!” This means that even if you have the best health insurance company out there if you treat for injuries after a crash, your car insurance PIP will always pay first. Not your health insurance and not Medicare.
Medical Payments – While we’re on the topic of PIP, let’s talk Med Pay. Med Pay supplements PIP. This coverage is optional, just like UM. While it’s not as critical to have Med Pay as UM, if you can afford this coverage, it’s good to have. As you now know, you have $10,000 of PIP but PIP will only pay 80% of your reasonable medical bills up to $10,000. What about the other 20%? Well, that’s your responsibilityit’s like a health insurance deductible.
Now, if you have Med Pay, it will pay the other 20% that PIP doesn’t pick up and it will also pay other medical bills at 100% up to a certain limit – to be chosen by you. $2,000? $5,000? You can even get $10,000 or even $50,000, depending on your car insurance company. Your insurance premium shouldn’t go up too much if you opt for Med Pay.
Oops, what if I caused the crash? Yeah, mistakes happen and that’s why we have car insurance in the first place. Bodily Injury insurance (BI) is mandatory in Florida and you must carry at least $10,000 of BI coverage. This coverage is important because if you were at fault in the crash and the other driver was injured this coverage protects your assets. Your car insurance company will assess the claim and negotiate a settlement on your behalf to pay off the injured party.
Now, in my mind, $10,000 is totally insufficient to cover you. If the injured driver is really hurt, $10,000 won’t fully compensate them. You should be insured to the extent of your assets. If you’re a college student with nothing but debt, the $10,000 minimum should be okay for right now. If you have investments in real estate or a boat or a fleet of collectible cars, you need to up those limits to the extent of your wealth.
BI limits can be $10,000/$20,000 or $25,000/$50,000 or $100,000/$300,000 or even $250,000/$500,000. Also, BI usually “tracks” UM/UIM. This means if you have $100/$300 BI limits, usually that’s what your UM limits are as well. They should mirror each other.
Do I need that much insurance? While you don’t want to be insurance poor with a big insurance premium, you want to cover your assets as best you can. And if you think “cover your assets” sounds a lot like covering something else, you’re right. They’re one in the same.
Why are there two numbers? $10,000/$20,000 – what’s that about? The first number is “per person” and the second number is “per occurrence”. So if you hit a car and are found at fault and there’s only one person hurt, he can make a claim for $10,000. If there were 3 people in that other car that all claim injury, they can make a claim among the 3 of them for an aggregate sum of $20,000.
My car’s all mangled, who pays? Okay, this can get complicated. Mandatory coverage in a policy of car insurance is Collision Damage, in case you were at fault and the other guy’s car needs to be repaired or totaled. The minimum mandatory is $10,000. But think how many cars out there are worth many times more than $10,000. If the other guy’s car has to be totaled and you only have $10,000 of insurance coverage, guess who pays the difference? You do.
Again, you don’t want to be insurance poor with a huge premium, but upping Collision Damage is wise. I recommend upping your Collision Damage to at least $50,000. Too many cars out there are very expensive to fix and total. If your insurance limits are too small to fully pay for the other car, you must work something out with the insurance company to pay off the difference or your driver’s license might be suspended. You can thank the Florida Legislature for that one.
But I wasn’t at fault, who will pay to fix my car? Well, in this case you have a choice: You can either make a claim against the at-fault driver’s insurance company through his Collision Damage provision or you can run it through your car insurance company but only if you have Property Damage coverage. This is very optional insurance. If you’re driving an 18 year old vehicle and its value is next-to-nothing, you may not have purchased insurance to cover your old clunker since it’s just not worth repairing.
But if you do have sufficient Property Damage coverage your car insurance company will repair or total your car. Why would I want my company to pay for my car when the other guy was at fault? Two words: It’s quicker. The other guy’s car insurance will only pay to have your car fixed or totaled after they’ve completed their investigation – and this includes waiting for a police accident report to be generated, getting a statement from their insured and talking to you. All the while your car is sitting in the shop.
If you go through your own car insurance it will be quicker, but you will be subjected to a deductible, usually $250 or $500. This means that the first few hundred dollars of repairs are on you – but, you will be reimbursed. Your car insurance company wants its money back so at some point they will go after the other guy’s car insurance (called “subrogation”), including getting your deductible refunded to you.
Okay, we’re almost done: You’re now an expert on UM/UIM, PIP, Med Pay, BI, Collision Damage and Property Damage. That’s six different insurances that you may have in your policy of car insurance. There is one more policy of insurance that you may want to consider – especially if you’re a worry-wart.
You know it just takes one simple lane change when a motorcyclist was in your blind spot to take out a cyclist. I’ve had many motorcycle injury cases in my practice. Their unpaid medical bills in these cases are generally in the hundreds of thousands of dollars. Motorcycles are largely uninsurable so the bills remain due and owing.
If you worry about this, you can take out a policy of Umbrella Insurance. You must get the largest policy of car insurance first – usually $250,000/$500,000 and then you can get a $1 million umbrella that will cover you on top of your limits if you’re at fault. That often extends to UM as well. So you’d be insuring yourself up to $1 million on top of the $250,000 if you’re hurt through the negligence of another. That’s a lot of insurance. And the nice thing is, because insurance is all about risk, the risk of an insurance company being hit for that $1 million policy is remote – so it’s not that expensive. A $1 million umbrella policy of insurance is almost always under $500 for the year.
Well, this was just a primer about car insurance – call it “Insurance 101”. It wasn’t meant to be exhaustive of all issues, but to familiarize yourself with what you have, what you should have and what limits of liability you might consider. Again, while you don’t want to be insurance poor, you want to insure yourself to the limits just higher than what your net worth happens to be – as a rule of thumb. But if you want more insurance, it’s certainly out there.
I hope this helped.