What are the different coverages in my automobile policy?
1. LIABILITY COVERAGE:
This coverage is required by state law though the amount of required coverage may vary from state to state. It is the insurance you purchase to protect “the other guy” when you are at fault and cause the accident. When the people you hit are injured (or any passengers in your own car that are injured in an accident that was your fault), and they make a claim against you, the claim is covered by your liability insurance.
The State of Nevada requires that motorists have minimal coverage totaling $25,000 per person and $50,000.00 per accident. This is usually reflected on your declarations page as “25/50.” The first number is the most that your insurance will pay any single individual involved in the accident in the car that you hit (or any passengers in your own car that are injured in an accident that was your fault) for their bodily injuries. The second number ($50,000.00) is the most that your insurance company will pay on any single accident as a combined amount to all of the claimants who were hurt as a result of the accident that you caused. For instance, if there are three people making a claim against you for their injuries, and their claims had sufficient damages to merit the full coverage, they will have to divide the $50,000.00 amongst themselves and would not be entitled to $25,000.00 per person (because that would total $75,000.00 and your per incident coverage is only $50,000.00). It is important to have high liability coverage so that the insurance takes care of the claim and the person you injure does not come after you personally and sue you for your home, bank accounts, and any assets that you hold. Whoever you injure has the option of suing you personally. Knowing this, you can decide how much coverage you want to insure yourself for in relation to your assets.
2. COLLISION COVERAGE:
Collision coverage is imperative for protecting your vehicle. Go and get your policy right now and DOUBLE CHECK THAT YOU HAVE THIS COVERAGE! If you do not have collision coverage and you are involved in an accident that the other side is saying “was not their fault,” no one is going to fix your car. If the accident was your fault and you do not have collision coverage, you will still owe the bank or dealership for the car even though it may have been totally demolished in the accident. With collision coverage, you have the option of paying your deductible (which usually ranges from $250.00 through $1,000.00) and your own insurance company fixes your car. When a judge, jury, or arbitration proceeding determines that the accident truly was their fault, your insurance company will go after the other guy’s insurance company to get you back your deductible and to also get their own money back that they paid out to have your car fixed (this is called “subrogation”). Some people choose not to have collision insurance on an older or inexpensive car because they are not concerned about repairing or losing it should it be dented or totaled in an accident. Most people do not have this luxury, and I suggest always maintaining collision coverage on your automobiles.
3. COMPREHENSIVE COVERAGE:
This coverage is similar to collision in that you pay your deductible and your own insurance fixes your car. However, the source of the damage is different. This coverage is triggered when you want to fix things like a rock hitting your windshield, vandalism, or theft (to name a few).
4. RENTAL/TOWING COVERAGE:
I call this coverage like having a big aspirin. It is definitely “headache medicine.” When you are in an accident and the other side is saying it is not their fault and will not fix your car, why would they pay for you to have a rental car? They won’t! So, if you are having your own insurance company fix your car through your collision coverage and you do not have rental coverage, you will simply be out of a car for the amount of time that it takes for your car to be fixed. This may be a week, but it may be a month. Without rental coverage on YOUR POLICY, you will simply be out of luck and buying a bus pass for transportation.
5. MEDICAL PAYMENTS COVERAGE:
Medical payments coverage generally pays for any medical bills incurred when related to an accident involving a motor vehicle. Each policy is different and contains different contractual language so you will have to refer to your own policy for the particulars of this coverage. But, generally speaking, as a named insured you can be a pedestrian on the Las Vegas Strip and be hit by another car and still use your medical payments coverage. This is true even though your car is sitting at home in your garage because this is an accident that involves an automobile.
I have been able to trigger coverage for a client who was at a gas station and simply getting out of her car but slipped on a gas puddle and slid underneath the car. This is because it was an accident “of or relating to” an accident involving an automobile. She was alighting from the automobile and actually slid underneath the automobile, and of course gas goes into an automobile.
Medical payments coverage is not like the other coverages where there is a maximum that your insurance company will pay out on any single accident. If you have purchased $5,000.00 in coverage and have four passengers at the time of the accident, you will each be entitled to your own $5,000.00 for medical bills.
Other states sometimes call this PIP or Personal Injury Protection. Under PIP, sometimes loss of wages, maids, and other household services that you are required to employ because of your injuries is included.
Also, this coverage is usually portable as a named insured on the insurance contract (again, refer to your own coverage contract), and if you are in your friend’s car and get into an accident, you can use your coverage on your vehicle even though it had nothing to do with the accident. There are no “co-pays” or “deductibles,” and this is also a real life saver.
6. UNINSURED/UNDERINSURED COVERAGE:
Collision coverage may be imperative for protecting your vehicle, but uninsured/underinsured motorist coverage is CRITICAL for protecting YOU! Absolutely purchase this coverage and in the largest amounts you can afford. In Nevada, uninsured goes with underinsured, but in other states they may be separate coverages. Make sure you have both of them.
Let’s say a drunk driver creams your car and you are not feeling so hot either. You leave the scene of the accident in an ambulance and find out later that the police report shows the drunk driver did not have any insurance. It is not likely that he was Daddy Warbucks with a load of cash in the bank in which to compensate you for your injuries. You could file suit against him personally, but actually recovering any money is a long shot.
BUT, if you had UNINSURED MOTORIST PROTECTION you could present the exact same claim that you would have against the drunk driver for your bodily injuries to your own insurance company, and they could evaluate your claim and compensate you up to the coverage limits that you have purchased—so purchase large limits! In Nevada, N.R.S. 687B.385 states that your own insurance company cannot cancel, fail to renew, or increase your premiums for using your own insurance coverage when the accident is not your fault.
Let’s change the scenario and say that the drunk did have insurance, but it was only the $25,000/00 per person, $50,000.00 per accident coverage discussed earlier. Let’s also change the facts to say that you were taken by ambulance to the hospital and subsequently had a two week stay in the intensive care unit. That medical bill alone will be thousands and thousands more than his policy could cover! $25,000.00 per person does not go a long way in this scenario. BUT, if you had UNDERINSURED MOTORIST PROTECTION (note the difference is the “under” versus “un” insured), you could accept the $25,000.00 liability policy the drunk driver had and make the balance of your claim to your own insurance company up to the amounts of coverage you had purchased—so again, purchase large limits!
These uninsured/underinsured motorist coverages are what you buy to protect you and the passengers in your car. Your coverage will likely be in the form of 25/50, 100/300, 250/500 (i.e. the last one would translate into $250,000.00 per person with a maximum of $500,000.00 paid out on any single accident). Your loved ones also traveling in your car are protected by this coverage as well when they are injured in the accident with you.
Interestingly, your uninsured/underinsured motorist coverage cannot be higher than the liability coverage you maintain on the vehicle.
I’m fault free in the accident and I don’t want to use my own insurance company. Do I have to?
First you should read your contract because you may have contractual requirements to report the accident. But, from a practical standpoint, NO, you do not have to use your own coverage if you do not want to. But, I tell my clients that this is silly because you are turning away money that you are entitled to! You pay a monthly premium to have this coverage and now you don ‘t want to use it? Again, Nevada has a statute (N.R.S. 687B.385) which states that your own insurance company cannot cancel, fail to renew, or increase your premiums for using your own insurance coverage when the accident is not your fault. So, if you have medical payments coverage and/or uninsured/underinsured motorist protection, USE IT!
Why do I need medical payments coverage? I have health insurance, so aren’t I covered?
Why not use them both? You pay a premium for both! Why not submit your medical bills to your health insurance and the medical payments coverage? This way, nothing comes out of your pocket, and you are entitled to use both coverages —you paid for them! Every month you pay a monthly premium to have health insurance. Every month you also pay a separate monthly premium to have medical payments coverage through your automobile insurance, and you should have them send the amount of the bill to you directly with the check made out to you in your name. Then you can manage the bills and if the health insurance has paid the bill, you can keep the medical payments money!
Working with all of your resources and knowing how health insurance and medical payments coverage (often called “medpay”) can be used together can help to maximize your recovery. And, I have not put all of my little secrets in this article! This is an area where an attorney can come in very handy because she/he will know how to work with both coverages to make sure you are getting every dime you deserve! These coverages can be used in such a way that your attorney can help you to get more money in your pocket at the end of the day than you may be able to figure out.
What auto insurance coverage should I have on my policy?
This is a financial decision for most people as the higher coverages come with higher monthly premiums. If you have carefully read this article and gone through some hypotheticals in your mind, you will realize that it is a gamble. Are you going to protect yourself and your loved ones for the everyday “rear end” type collisions? Or, are you going to protect yourself and your loved ones by making sure that you have the coverage necessary to get all of the medical treatment you may need and from going bankrupt in the event you have a catastrophic, life changing collision? This is not a gamble I want to decide for you, but I will say that I personally have the most insurance I could have purchased through my automobile insurance policy (including the most in liability, underinsured/uninsured, medical payments).
I have “full coverage.” What does that mean?
It means that someone told you “full coverage” and you took that to mean “fully protected”—NOT SO! You likely have liability (which protects the other guy in the event that you cause the accident), and collision/comprehensive coverage (which protects your car). “Full coverage” is misleading because it may not include the uninsured/underinsured or medical payments coverage which is so critical.