Do You Have Enough Insurance To Protect Your Family In The Event of an Accident?
This is the ONE message you want every family member or friend to read. Why? The information contained in this blog could mean the difference between your family, friend or you in having a secure financial future in the event any of you are involved in a car crash versus having to file for bankruptcy - it’s that simple!!
I met with a client last week in the hospital. He had been transported to the ER by ambulance after having been in a catastrophic car crash earlier in the week. I met with him while he was in the Intensive Care Unit (ICU). I observed that he was suffering from multiple fractures as a result of another driver having failed to yield the right-of-way who had pulled out in front of him while attempting to make a left hand turn causing the client to crash into the side of the negligent driver’s vehicle. The impact was severe. The client incurred multiple fractures which may likely require multiple surgeries to help him reach stability.
A five day stay in the hospital involving 3 days in the ICU along with a surgery is going to result in him having to be off of work for weeks and possibly months as he engages in a long stint of physical therapy. His losses are likely going to top over $250,000.00 in medical expenses and lost wages.
I asked him about his insurance coverage, and he said, "I have full coverage."
I asked him, "Full coverage? Do you know what that means?" He replied, "Quite frankly, No."
HAVING FULL COVERAGE IS A MISNOMER.
Full coverage in the context of an automobile insurance policy only means that you have both collision and comprehensive coverage. In other words, "full coverage" provides that your vehicle is covered by insurance for property damage incurred to it in the event the damage is caused by a collision or non-collision event such as damage caused by hail, damaging winds or vandalism. Full coverage doesn’t mean that you have sufficient coverage in place to protect you in the event you incur a catastrophic loss involving significant medical costs or time off of work to recover.
WHAT CAN YOU DO TO PROTECT YOURSELF FROM HAVING TO GO INTO BANKRUPTCY IN THE EVENT OF INCURRING A CATASTROPHIC LOSS?
Insurance companies sell in conjunction with their standard coverages for bodily injury and collision damage a line of products known as underinsurance motorist coverage and excess or "umbrella" coverage.
UNDERINSURANCE MOTORIST COVERAGE COMES IN TWO DIFFERENT TYPES OF COVERAGE
Underinsurance motorist coverage is an additional tier of coverage you can purchase that protects you in the event the other person’s coverage is insufficient to cover your claim or losses.
The State of Idaho only requires that a motorist maintain insurance coverage for bodily injury caused by the driver’s negligence with a minimum policy limit of $25,000.00 per person up to $50,000.00 aggregate per occurrence. This means that if your bodily injury was caused by a car crash, and the damages are valued in excess of the negligent party’s insurance coverage, you may be out of luck in recovering any additional compensation over and above the other person’s minimum limits unless you have adequate underinsurance motorist coverage protection in place at the time of the crash.
Depending on the insurance policy, some insurance carriers calculate underinsurance benefits differently. Some policies take the amount of underinsurance coverage you purchase and stack that coverage over and above the bodily injury coverage of the other driver to determine what the total maximum benefit you may be entitled to receive. In the case where you have a $100,000.00 in UIM coverage that the other driver has minimum limits of bodily insurance coverage of $25,000.00; the total alottment of available coverage for bodily injury and UIM coverage in that case would be $125,000.00.
However, these days most insurance companies provide UIM coverage on a differential basis which means that instead of stacking your policy for UIM coverage over that of the bodily injury coverage of the negligent driver, they calculate the coverage by taking the difference between the amount of coverage you have for UIM coverage less the coverage the negligent driver has for bodily injury. In the same hypothetical, if the other driver has $25,000.00 of bodily injury coverage and you have $100,000.00 of UIM coverage, you take your amount of coverage of $100,000.00 less the other driver’s coverage of $25,000.00 which brings a total coverage for UIM to $75,000.00. Adding the amount of coverage the defendant has in the amount of $25,000.00 to your coverage for UIM, that would bring the total amount of coverage available to this occurrence in the amount of $100,000.00.
Yet, in the case where you have a differential or "offset" provision of your policy and you UIM coverage is equal to the amount of coverage the other driver has for bodily injury, there is NO coverage for UIM in that occurrence. In other words, if both you and the negligent driver have the same amount of coverage of $25,000 for UIM coverage and bodily injury, respectively, your insurance carrier would provide NO coverage for UIM ($25,000.00 - $25,000.00 = $0.00).
EXCESS OR UMBRELLA COVERAGE CAN PROTECT YOUR FAMILY FROM A CATASTROPHIC LOSS.
Many insurance companies sell a product called excess insurance coverage otherwise known as "umbrella" coverage. Excess coverage is available to consumers that protects the insured from a catastrophic loss that exceeds the coverage of their auto and homeowner’s policies. If a person purchases a rider or endorsement that attaches their UIM coverage to their excess or umbrella policy, then the excess or umbrella coverage will apply to any claim they have over and above the other driver’s insurance up to the policy limit of the excess or umbrella policy. So if the excess or umbrella policy has a policy limit of $1,000,000.00; then the insured has up to $1,000,000.00 in available insurance to cover their losses incurred in a motor vehicle collision provided that the insured has purchased the excess policy with an endorsement linking the UIM coverage to the excess or umbrella policy.
So there you have it folks. I have seen clients who had purchased automobile insurance coverage with "full coverage" benefits only to find out that they were woefully under insured to cover them for their losses incurred. I have also seen clients who had a large amount of UIM coverage only to find that after visiting with a competent insurance salesperson, they were able to lower premiums by purchasing UIM coverage with lower policy limits but then make up the difference by purchasing another policy with excess or umbrella coverage. I have also seen where families were able to double their coverage by purchasing an excess or umbrella policy with coverage up to a million dollars for essentially the cost of a 2 liter bottle of soda a day!
So it’s wise to visit with an insurance specialist that sells both auto, homeowners and excess or umbrella coverages that can provide you with a consulttion who can give you a quote to make sure that you have adequate coverages in force and effect to cover you in the event of a catastrophic loss.
If you have any questions regarding how to protect yourself in advance of having a catastrophic loss, give Boise Trial Lawyer Alan Morton a call at 208.344.5555, toll free at 888.716.8021 or by completing an online contact form. He would be happy to answer any questions you may have or refer you to an insurance specialist to help you with your insurance needs to protect your family and you in the event you incur an injury or loss.