You should be aware that an auto insurance policy is a legal contract. It is written so your rights and responsibilities, as well as those of the insurance company, are clearly stated. When you purchase auto insurance, you will receive a policy. It is shrewd to take the time to read your policy and make certain you understand its contents. If you have questions about your insurance policy, contact your insurance agent for clarification. Although many may often tell you to buy as much car insurance as you can afford. Such advice is likely not helpful unless you clearly understand the differences between the coverage options.
This article will take the time to discuss three important items you should understand when purchasing automobile insurance.
1. What is Uninsured/Underinsured Motorist coverage and do I need it?
This is often the most overlooked and undervalued coverage of any automobile insurance policy. More often than not, our clients are confused about what this coverage is and why it matters. That is unfortunate because uninsured/underinsured motorist coverage (or UM/UIM coverage) is the most important part of any automobile insurance policy when you are not at-fault in causing an accident. UM/UIM coverage protects you and your passengers in the event an uninsured or underinsured driver causes you harm on the road. When drivers and insurance agents attempt to seek the cheapest insurance rates possible, this is generally one of the coverages that are minimized, reduced or removed from the policy altogether. You should not let that happen.
At the Sacramento & Elk Grove-based O'Brien & Zehnder Law Firm, we recommend obtaining the maximum amount of UM/UIM coverage you can afford, but in no circumstance should it be less than your liability coverage. Generally, we recommend at least $100,000 in coverage. This is especially true when the soaring costs of health care are taken into account. Claims from an automobile accident routinely exceed $100,000, so even if you have that much coverage, there is no guarantee it will be enough. However, $100,000 in coverage is far better than nothing when the at-fault driver is uninsured.
If you do not know whether you have UM/UIM coverage, or you do not know your UM/UIM limits, we strongly suggest you contact your insurance broker/agent/carrier immediately to request this information and possibly increase your UM/UIM coverage accordingly. Many times increasing your UM/UIM coverage limits to $100,000 or $250,000 will only result in a small change to your monthly premium. Trust us, the few extra dollars per month is worth protecting you and your loved ones. One of the most difficult parts of our job is telling an injured person with little or no UM/UIM coverage that the driver responsible for their injuries had no insurance or a minimal $15,000 in coverage. In many of those cases, there is simply no one left to compensate the person for their harm.
2. What is Medical Payments Coverage and do I need it?
Medical Payments coverage (or Med-Pay) is no-fault insurance that covers your medical costs after you are hurt in an automobile accident. For drivers with health insurance, this coverage is useful to cover any out-of-pocket expenses you may incur, such as deductibles or co-pays, as well as any medical treatment that is not covered by your health insurance policy, such as chiropractic or acupuncture. For drivers with no health insurance, Medical Payments coverage is even more crucial as it may be the only way to get the care and treatment you need following an accident. Again, this coverage will cover any medical expenses caused as a result of an automobile accident, regardless of who was at fault.
Most automobile insurance carriers will offer Medical Payments coverage ranging between $1,000 and $25,000. For drivers with health insurance, $5000-$10,000 is usually sufficient to cover those health care costs not otherwise covered by health insurance. For drivers without health insurance, we recommend Medical Payments coverage up to the maximum you can afford, and your insurer will offer.
In the event you are injured by another driver, one ancillary benefit of Medical Payments coverage is that it can sometimes work to increase your personal injury recovery by decreasing the amount you have to pay back to your health care providers and other insurers following the resolution of your personal injury claim.
If you do not know whether you have Medical Payments coverage, or you do not know your Medical Payments coverage limits, we strongly suggest you contact your insurance broker/agent/carrier immediately to request this information and possibly increase your Medical Payments coverage accordingly.
3. What are adequate limits of coverage?
There is no set amount that constitutes sufficient automobile insurance coverage across-the-board. Whether your coverage limits are adequate depends on a number of factors, such as your assets and personal wealth, your driving history, your age, your health, who is insured under your policy, and a whole host of other factors that are too numerous to list here. However, one thing is certain, the minimum requirements for insurance coverage in the State of California are inadequate to protect you and your family. You should not fall into the trap of obtaining a minimal insurance policy in an attempt to save a few dollars on premiums.
California law requires that a private passenger vehicle have minimum liability coverage of $15,000 for injury or death to one person, $30,000 for injury or death to more than one person and $5,000 for damage to property. (Cal. Vehicle Code § 16056; Cal. Ins. Code § 11580.1.) In essence, this means that if you cause an automobile accident, your insurance company will cover you up to these amounts. However, in many cases, an injured party’s damages, which often include medical expenses, lost wages, pain and suffering and vehicle damage, can be far in excess of these amounts. Having insufficient insurance could potentially expose your personal assets to judgment in excess of these minimum amounts. Moreover, these minimum amounts provide no coverage when you are not the at-fault driver, and the at-fault driver has no insurance or inadequate insurance to cover you or your passengers. The coverage you need for this situation is uninsured/underinsured motorist coverage (UM/UIM), which insurers are required to offer in connection with all policies of automobile insurance. (See Discussion on UM/UIM coverage in #1 above.)
At the O'Brien & Zehnder Law Firm, we recommend having the following coverages and minimum limits on your automobile insurance policy:
The maximum amount you can afford but no less than $100,000 or more for injury or death to any one personThe maximum amount you can afford but no less than $300,000 or more for injury or death to more than one person
The maximum amount you can afford but no less than $100,000
The maximum amount you can afford but no less than $5,000.
The maximum amount you can afford but no less than $25,000. (this is not collision coverage for damages to your own vehicle; this is coverage to pay for property damage you cause to another vehicle when you are at-fault)
Please note, these coverages and minimum coverage limits are not substitutes for legal advice and in no way constitute legal advice or give rise to an attorney-client relationship. Adequate insurance coverage for individuals and passenger vehicles is fact-dependent and requires independent analysis and inquiry specific to your situation and circumstances. These are provided to explain in general and brief terms certain issues that arise with respect to automobile insurance coverage and serves to provide general information about why the minimum automobile insurance limits required by California law are not adequate under many circumstances. The limits listed above may also be inadequate in your specific circumstance and this article in no way warrants or suggests that these minimum limits will be adequate in the event you are involved in an automobile accident or are otherwise injured or cause injury to person and/or property.
DISCLAIMER: This article is not a substitute for legal advice and in no way constitutes legal advice or gives rise to an attorney-client relationship. Adequate insurance coverage for individuals and passenger vehicles is fact-dependent and requires independent analysis and inquiry specific to your situation and circumstances. This article is simply meant as a guide to explain in general and brief terms certain issues that arise with respect to automobile insurance coverage and serves to provide general information about why minimum automobile insurance limits are not always adequate. Contact the Sacramento & Elk Grove-based O'Brien & Zehnder Law Firm at 916.714.8200 if you require legal help or wish to seek legal advice on your specific legal issue(s).