Different Types Of Auto Insurance And Policy Add-Ons

Most people celebrate the day their car is paid off and they can switch their auto insurance policy from “full-coverage” to “limited liability” (California’s legal minimum insurance requirement). Be careful before you do that, as a single auto accident is enough to make anyone wish they would have paid a little extra to get premium benefits.

California Auto Insurance Policy Basics

It is illegal to drive any vehicle in the state of California without some type of insurance policy. The California Department of Insurance website states:

All drivers and all owners of a motor vehicle shall at all times be able to establish financial responsibility and shall at all times carry in the vehicle evidence of the form of financial responsibility in effect for the vehicle." If you do not have auto liability insurance, you can be fined, your license may be suspended, and your vehicle could be impounded.

There are many different types of auto insurance policies and available add-ons. How do you know what type of coverage is best and how much coverage to get?

Liability Insurance

This is the foundation of all auto insurance policies and is the minimum type of insurance legally required to drive a car in California. Liability Insurance includes bodily injury coverage and coverage of property damage.

It is important to note that liability coverage is designed to cover the damage sustained by another person if you are determined to be at fault for an accident, i.e., damages that you cause to someone else and their property. This coverage provides no coverage for the costs of injury/damages to yourself or family members.

It is also crucial to understand that the amount of coverage you have is limited based on the policy limits that have been elected. For example, if you elect coverage limits of $15,000 per person/$30,000 per accident (the minimum amount of insurance that is required by law), those amounts are the most your insurance company will pay for the bodily injury claims of those who were injured due to the accident you caused. Thus, if you caused an accident, and there were 4 people who were injured as a result of the accident, the most your insurance company will pay to all 4 people is $30,000. This means that the 4 people who were injured will have to divvy up your $30,000 per accident insurance limits, with no 1 person taking more than $15,000 (the per person limit). In this instance, if those who were injured sustained damages in excess of these amounts, they can pursue you individually, and go after your personal assets, to make up the difference between what they received from the insurance company and what their actual damages are.

This is why it is imperative that you have the highest limits you can afford in liability coverage. Depending on the insurance company, a person can elect limits ranging from $15,000 per person/$30,000 per accident, up to $1,000,000 per person/$1,000,000 per accident, or higher. The most common limits that are deemed “reasonable” by those in the industry $250,000 per person/$500,000 per accident. While this may seem high, consider that most accidents that cause moderate injuries can require an ambulance ride, an overnight stay in the hospital, surgeries, follow-up care, and time off of work. It is easy to understand how quickly the costs associated with the treatment of accident-related injuries can add up.

Property damage limits vary and are generally based on the bodily injury limits selected. If a person has elected bodily injury limits of $15,000 per person/$30,000 per accident, they ordinarily are not permitted to have property damage limits higher than $5,000.  What this means is if that person causes an accident, the most their insurance company will pay to another person for property damage (most commonly car repair) is $5,000. If the person who was not at fault for the accident has property damage that exceeds $5,000, they can pursue the at-fault party individually for payment of the difference between what the insurance company paid and what the actual property damage cost. Additionally, if the at-fault party causes damage to structures (i.e., homes, buildings, signage), and the value of the damage exceeds the amount of the property damage coverage, the owner of the property can pursue the person individually for payment of the costs of repair.

 For this reason, unless you want to guarantee a lawsuit against you, you should have sufficient property damage coverage on your automobile policy. Keep in mind that the cost of a new car has increased dramatically in recent months. Some of the new electric vehicles cost $100,000 or more. If you only have $5,000 in property damage coverage and cause an accident with a person who is driving one of these vehicles (i.e., a Tesla), you could be personally responsible for paying close to, or more than, 6 figures to repair that vehicle.

Insurance Policy Add-Ons

If you took out a loan to purchase your car, lenders require you to carry full-coverage because they want to insure the value of the vehicle in case you are involved in an at-fault accident, an accident with someone who has limited liability insurance, or an accident with an uninsured or underinsured motorist.

You can optimize an auto insurance policy by using policy add-ons. In addition to increasing your liability limits (both bodily injury and property damage limits) as discussed above, upgrading to a full-coverage policy is an excellent way to ensure you and your family members and passengers are protected. Below are some coverages which you can add to your policy to protect yourself and others.

Collision coverage

This type of insurance covers the costs of repairing your own vehicle if you cause an accident. It also provides coverage if you are not at-fault for an accident, but the person who is does not have sufficient property damage liability limits on their own insurance policy.

Comprehensive coverage

This type of coverage provides protection in the event your vehicle is damaged due to events beyond your control, i.e., a falling tree or branch, theft, vandalism, hail, damage from hitting an animal, etc.

Medical payments coverage

This coverage reimburses you and every person in your vehicle for medical expenses incurred related to an accident. This coverage applies regardless of who caused the accident. Thus, if you have $5,000 worth of medical payments coverage on your policy and you cause an accident, you and everyone that was in your car can access up to $5,000 each in reimbursement for medical expenses incurred. This coverage can also be accessed if someone else caused the accident, but you and the passengers in your car needed medical treatment.

While some people decline this coverage, especially if they have their own medical insurance, this coverage is helpful because some medical expenses are not covered by medical insurance, i.e., co-pays, co-insurance, chiropractic care, over-the-counter medications, etc. All of these types of expenses that are not covered by health insurance are reimbursable through the medical payments portion of an automobile insurance policy.

Uninsured motorist coverage

While it may be illegal to drive an uninsured car, it is alarming how many people drive uninsured or without sufficient coverage. Uninsured motorist coverage helps to fill the financial gap created when an insured driver is hit or involved in an accident caused by a driver without auto insurance or without enough insurance to cover treatment for their bodily injury and property damage.

If you are involved in an accident with an uninsured or underinsured (one that does not have high enough bodily injury limits) driver, you can tap into your own uninsured motorist coverage to make up the difference in what you received from the at-fault party’s insurance company and the value of your bodily injury claim. This is why it is vital that your own automobile insurance policy has as high of an uninsured motorist coverage limit as you can afford. I cannot tell you how many times I have had to tell clients that there is no money to compensate them for their injuries, or for their family member’s death, because not only did the at-fault party not have sufficient liability limits, but they themselves did not carry sufficient uninsured motorist coverage limits. If you are involved in a severe accident that requires significant medical treatment and time off of work, the value of your claim can easily rise into the high six-figure to the low seven-figure range or higher. However, if the at-fault party does not have bodily injury limits in those ranges, and if your own policy does not have uninsured motorist coverage in those ranges either, you will have no source of recovery.

You cannot bank on the at-fault party having sufficient insurance limits or personal assets to appropriately compensate you for your injuries. The sad truth is that most people who do not have high insurance limits also do not have big bank accounts or other assets that can be used to satisfy a judgment. Thus, if the person who caused your injuries does not have enough insurance, going after that person individually often results in no recovery. If you want to help secure the right to recovery for injuries you sustain as the result of an accident, it is crucial that you have high uninsured motorist limits on your own automobile policy to protect yourself against the driver who does not have insurance or has too little coverage.

Personal Injury Lawyers Demystify Auto Insurance To Cover Their Clients

Were you recently involved in an accident and feel you are owed more insurance money? Does it feel like your insurance carrier - or the other party’s carrier – is not paying out like they should? Schedule a consultation with Burneikis Law to review your case. We will take the mystery out of your policy and determine if you are getting the compensation you deserve.