Insurance: The Myth of “Full Coverage”
By Richard H. Adler, Jacob W. Gent
November 13, 2004
There is a popular myth if you have purchased “full coverage” from your automobile insurance company, you will be covered for anything and everything when an automobile accident occurs. It is only after a collision that the myth of “full coverage” is soon replaced by the reality of “insufficient coverage.”
Automobile insurance policies are comprised of five types of coverage, three of which focus on bodily injury to you and which you cause to others, and two on property damage to your car and which you cause to other cars. Many people who purchase insurance are led to believe when they put down their first payment they have obtained “full coverage” if they buy all five. Having coverage in each area, however, does not mean you have “full coverage”; it simply means you have some coverage in each area.
The important question is not whether your agent says you have ‘full coverage”. The true question is whether or not the coverage is enough to protect you given your particular situation. The three main types of coverage which consumers regularly do not purchase high enough limits for include: Liability, Personal Injury Protection and Uninsured – Underinsured Motorist Coverage.
Liability insurance is mandatory in Washington State. Liability insurance acts as a shield to protect you and your assets when you cause an injury or loss to another person. The amount of insurance coverage available to you depends on the amount of coverage you purchase with your premium payment. The ‘mandatory minimum’ amount of liability coverage you must buy in Washington State is a 25/50/10 policy. This means that for anyone one loss (or accident) the policy will pay up to $25,000.00 per person, up to $50,000.00 for multiple injuries or losses in the same collision, and up to $10,000.00 for property damage caused by the policy holder in that accident.
Typical limits for liability coverage offered included 25/50/10, 50/100/25, 100/300/50, and 250/500/250. A driver with a 25/50/10 policy who causes moderate or significant bodily to one person will have only $25,000.00 to pay for injuries and damages which may turn out to be much higher than that amount by the time the injured person has recovered. A driver with a 25/50/10 policy that causes a four car pile up will not have sufficient coverage for property damage to four different cars, let alone to provide for multiple injury payments. Once the liability policy limits of the at-fault driver’s policy have been exhausted, his or her personal assets (home, auto, bank account, retirement account, or other assets) become subject to legal action by the injured victim(s) to pay the remaining amounts owed.
Personal Injury Protection
Personal Injury Protection (PIP) is also mandatory in Washington State. However, unlike liability coverage, the consumer can knowingly and willingly sign a written waiver acknowledging the importance of PIP coverage but declining to purchase it. PIP is the primary or first layer of coverage to pay medical expenses for treatment of bodily injuries from the auto collision. PIP pays the treatment bills regardless of whether the insured or someone else caused the auto accident. PIP also has provisions to protect you for loss of income and household services in case you are unable to work or take care of household chores because of your injuries from the collision. The mandatory minimum limit of PIP coverage offered in Washington is $10,000.00 with medical benefits payable for up to three years after the date of the accident. Higher levels of coverage are available for slightly higher premiums. Generally speaking, PIP covers every person who was in the car at the time of the automobile collision. Each injured person is entitled to payment of up to $10,000.00 in medical expenses. This is especially important coverage for individuals who frequently have other passengers in their vehicle such as family members, friends, soccer team players, or carpoolers. PIP coverage also provides coverage to the policy holder and household members if they are struck by a vehicle while a pedestrian or bicyclist. Of note, PIP also pays benefits to pedestrians and bicyclists you hit with your car.
PIP is the most overlooked and undervalued coverage by consumers trying to save money on their automobile insurance policies. PIP is relatively inexpensive and provides front line protection to ensure you and your passengers get proper healthcare treatment following a traumatic personal injury. Spending the small amount of extra money to purchase PIP now will save you far more money later when you need to use it. We strongly recommend everyone carry PIP insurance coverage.
Uninsured Motorist (UM) and Underinsured Motorist (UIM)
Just like PIP coverage, insurance companies are required to offer UM/UIM coverage to their policy holders under Washington State insurance law. As is also the case with PIP coverage, the policy holder has the right to waive the coverage. We strongly recommend against waiving Uninsured Motorist coverage (UM). UM protects you and others in your car when another driver who has no liability insurance of their own causes a collision that injures and damages you. Underinsured Motorist coverage (UIM) protects you and others in your car when another driver who has insufficient liability coverage to fully compensate you for your losses and injuries causes the collision with your vehicle. With both UM and UIM coverage, your own insurance company will “stand in the shoes” of the uninsured or underinsured at-fault driver to cover your losses as if the at-fault driver did have adequate insurance.
The limits of UM and UIM coverage are determined at the time you purchase the insurance policy. The amount of coverage must be the same as the amount of liability coverage. UM/UIM coverage is extremely important as many drivers have no insurance or have insufficient coverage to protect themselves and compensate you when they are at fault. Without this coverage you may be set back tens of thousands of dollars in auto repairs, medical expenses and loss income in a split second, and have no ability to recover on your claim for the reduction in the quality of your life (known as “pain and suffering”) the auto accident has caused.
Conclusion and Free Automobile Insurance “Tune-up”
It is important to educate yourself in order to make the best decisions when purchasing insurance. Insurance premiums are determined by multiple factors such as the types and levels of coverage on a specific policy. The difference in premiums for the higher levels of insurance coverage which will offer you more complete protection are often fairly small amounts over the life of the policy, especially when weighed against the amount one stands to lose if coverage proves inadequate. Take the time to read and understand your policy. Ask questions before an accident or loss occurs so you are familiar with what is and is not covered. Being well informed about the in’s and out’s of your insurance coverage will make the claims process somewhat smoother.
The personal injury attorneys at Adler Giersch PS are in the process of setting up a few evening programs to assist consumers in sorting out their automobile insurance policies. These will take place at their offices in Seattle, Bellevue, Everett and Kent. Contact us for more information on these talks, as well as for a free consultation if you have been injured in an automobile or other injury causing incident. You will be glad you did.