Components of an Automobile Insurance Policy
By Richard H. Adler
January 13, 1994
As a law firm whose practice is devoted exclusively to personal injury cases and insurance issues, clients, friends, community members, and business associates often ask us questions concerning insurance coverage. “How much insurance coverage should I have?” “What types of insurance coverage should I have?”
The answer to those questions depends upon an individual’s specific concerns and insurance needs. When selecting your automobile insurance company, it is a good idea to “shop around” because a wide range of premiums are charged by different companies for essentially the same coverage.
An automobile insurance policy is a legal contract between you and your insurance company. The types of vehicles you own, as well as other statistical data such as the household drivers insured, their ages and marital status, coverage limits, rating territory, and discount eligibility will determine your policy premium.
The following information may also assist you in understanding who to bill for your patients’ treatment costs resulting from a motor vehicle accident. Moreover, this article will assist you in evaluating the type of coverage you carry on your own vehicle.
Personal Injury Protection (PIP)
Your Personal Injury Protection (PIP) policy is one type of insurance coverage contained in the package of automobile insurance. PIP is a first-party contract between you (the insured) and your insurance company (insurer). PIP provides 100% coverage for injuries sustained by you or a passenger in your vehicle as a result of an accident, with no co-payments or deductibles; however, treatment costs must be reasonable, necessary, and related to the automobile accident. Payment of benefits under one’s PIP policy does not depend upon a determination of which party is at fault for an accident. There are three parts of a PIP policy.
All PIP policies will cover, at a minimum, medical charges (e.g., x-rays, ambulance fees, hospital fees, chiropractic fees, cervical pillows, medications, devices, medical doctors’ fees, licensed physical therapy, licensed massage therapy) for one year from the date of the accident or up to $10,000.00, whichever comes first. Some insurer’s policies offer coverage for up to three years from the date of the accident; others have coverage greater than $10,000.00 and up to $35,000.00. Recently, the Washington State legislature passed a law mandating all automobile insurance companies in Washington to offer PIP coverage to their insureds. This new law becomes effective July 1, 1994, and all PIP policies will cover medical charges for three years from the date of the accident or $10,000.00, whichever comes first. Though the insurer must offer PIP coverage, the insured has the right to reject such coverage. However, the rejection must be in writing and signed by the insured.
B. Wage Loss
PIP also includes wage loss reimbursement calculated at 85% of the actual wage loss, to a maximum of $200.00. A more comprehensive PIP policy may provide wage loss up to $700.00 per week. However, there is an exclusion in all policies which prohibits wage loss coverage for the first fourteen days from the date of the accident.
C. Household Services Expenses
PIP also includes reimbursement for necessary household help from $12.00 to $36.00 per day, depending on the terms of the policy, when it is reasonable and necessary for your patient to hire household help. Under the new law governing PIP policies that goes into effect on July 1, 1994, reimbursement for necessary household expenses will be $40.00 per day, not to exceed $200.00 per week, up to a maximum of $5,000.00.
It is mandatory for every operator of a motor vehicle to carry liability insurance coverage in Washington State. The mandatory minimum policy must cover “$25,000.00 per person/$50,000.00 per occurrence.” While automobile liability insurance has recently become mandatory, there are many individuals who remain uninsured.
Liability insurance provides coverage for you if you are at fault for an accident. Your insurance company pays damages to the injured person(s), not to exceed your liability policy limits. Included in liability insurance is coverage for bodily injury and damage to or destruction of property, including loss of use resulting from the ownership, maintenance, or use of an insured vehicle. Liability insurance also provides coverage for the costs in defending you if a lawsuit is filed by the injured persons.
As an example, if your liability policy reads “25/50/10” in the “Limits of Liability” section of your policy, then your insurance policy covers a maximum of $25,000.00 liability bodily injury coverage per injured person, up to $50,000.00 per occurrence (if more than one person is injured in the same accident) and a maximum of $10,000.00 liability property damage for a collision for which you are at fault. If you cause an injury or loss that is less than or up to your liability policy limits, then you are covered and do not risk losing any personal assets. However, if you cause an injury or loss that is greater than your policy limits, then your personal assets may be at risk.
Uninsured/Underinsured Motorist (UM/UIM)
Uninsured Motorist coverage (UM) protects you when an accident is caused by a driver who is uninsured. Included in the UM policy is coverage for bodily injury and property damage. For example, if your car is struck by an uninsured driver, and you are injured, you could present a claim for coverage on your own Uninsured Motorist insurance policy. While it is the law to carry liability insurance in Washington, don’t assume that every driver on the road today has liability insurance. Many drivers remain uninsured. It would be an unwise decision not to carry Uninsured/Underinsured Motorist coverages.
Underinsured Motorist coverage (UIM) protects you or family members when the at-fault party’s liability bodily injury policy is insufficient to cover your injuries, losses, and damages. In this instance, you present two claims: (1) to the liability insurer of the at-fault party for the entire limits of their liability policy, and (2) to the underinsured motorist carrier (your insurance company) for the balance to “make you whole again” from the losses incurred.
Property Damage to Your Vehicle
A. Collision: Collision covers damage to your vehicle as a result of a collision accident.
B. Comprehensive: Comprehensive covers damage to your vehicle as a result of an occurrence other than a collision. Examples of a comprehensive claim would be damage as a result of fire, lightning, flood, falling objects, explosion, earthquake, theft, or impact to or by an animal.
C. Deductible Amount Under Collision and Comprehensive Policies: Each insurance company has deductibles under collision and comprehensive policies. The deductible means that the insured pays the deductible amount and the insurance company pays the balance for repairs or settlement of a total loss.
Other Elective Types of Coverage
A. Loan Endorsement Coverage: Many insurance companies offer coverage protecting the loan balance of a vehicle. Loan endorsement applies to new vehicles only. There is a premium charged for this coverage and the cost varies depending on the make and model of the vehicle.
B. Car Rental and Travel Expenses: Rental coverage and travel expenses are another form of elective coverage. Most insurance companies provide a rental vehicle at a per day limit when your vehicle is being repaired as a result of an accident or occurrence.
C. Towing and Emergency Road Service: Many insurance companies will pay for the cost you incur for towing, emergency road service, or mechanical labor as a result of an accident or breakdown.
While many companies offer similar types of coverage, the policy language may vary from company to company. It is important to carefully read the terms of coverage for each type of coverage you are purchasing and be aware of all “exclusions” under each policy.
If you have questions or concerns about insurance coverage or exclusions when shopping for insurance, ask the agent or broker offering the policy to thoroughly explain the types of coverage and exclusions. We hope this article will assist you in asking the right questions.
Very truly yours,
ADLER GIERSCH, P.S.
Richard H. Adler
Attorney at Law