What Truly is Important About My Auto Policy and Why?
By: Jerry Fischer, CIC, CLCS, AAI
Article as seen in: "Lycoming / Clinton Woman"
Auto Insurance - Pull your Auto Policy out this weekend and look at all the funny abbreviations that have a way of mixing everybody up that tries to interpret them.
Here’s a quick reference. BI = Bodily Injury (This is the category the Insurance Company pays out of when you’re at fault in an accident and hurt another party)
PD = Property Damage (This is the category the Insurance Company pays out when you’re at fault in an accident. It pays for the other car you ran into, the fence you took out, the mailbox or even hitting a house). Now, look and see how much coverage you purchased. Examples: 15/30, 25/50, 50/100, 100/100, 100/300, 300/300 etc. Now what does that mean? Next to the BI you may see 15/30. This means that the Insurance Company will only pay out 15,000 per person, 30,000 per accident on your behalf if you hurt someone in a car accident. This is the minimum limit the state requires to legally have your car on the road. So let’s say you’re at fault in an accident but the other party is suing you for 45,000 and win! Your Insurance Company will only pay the 15,000 per person amount unless you hurt more then one person then it would go to the 30,000 amount. So where does the other 30,000 come from? Unfortunately, out of your pocket!
I strongly recommend that you have at least 300/300 and then have a Personal Umbrella Policy for an additional One Million Dollars just in case 300,000 is not enough. Don’t risk what you’ve worked so hard to attain and let’s protect each other’s future by carrying the proper amount of BI and PD Liability Insurance. These two coverage’s are very important in protecting you and your assets.
UM/UIM This means Uninsured /Underinsured Motorists. You’ll also notice whether or not you have "Stacked" or "Unstacked" limits. Ok, so what does all this mean and why should I care? This is a coverage you purchase for you and your family. Let’s say you’re going to Jersey Shore from Williamsport one day in the middle of winter. You suddenly see a car loose control traveling in the opposite direction. This driver spins out, crosses the median and hits you head on! You wake up in the Emergency Room with a fractured hip, a broken leg and stitches in your forehead. You then find out the party that hit you only had 15/30 for BI under their own policy. Let’s say for the sake of this example you are carrying on your own policy 100/300 for both UM/UIM coverage and you have "stacked limits". You meet with your lawyer and he/she indicated the injuries you sustained could be valued as high as 120,000. Now what? Your Lawyer will give notice to your Insurance Company that there may be a good reason for a UM/UIM claim because the party that hit you didn’t have enough insurance. Sure enough because of the permanent scar left on your forehead and the pain and suffering due to the fractured hip and broken leg your Insurance Company paid you out 120,000. But hey, wait a minute! How could I get 120,000 when you just got done telling me I had 100/300? Ok, I just wanted to see if you were paying attention. Here is the “rest of the story” Because you had two cars on your policy and you purchased “stacked” limits, you’re entitled to double those coverage’s for UM/UIM so now you really had 200/600. If you had three cars you have three times the coverage 300/900. Let’s say you purchased "Unstacked Limits" now what happens?
Unfortunately, the Insurance Company is not interested in how many cars you’re insuring with them because you chose "unstacked" so instead of getting the 120,000 the Insurance Company would have stopped at 100,000. This is why it’s less money to buy Unstacked versus Stacked because you agreed that if anything like this would ever happen to you 100,000 per person would be enough for you no matter how many cars you had on the policy. That’s why it’s so important to sit down with you Agent and go over you coverage’s and that’s why our clients here are so loyal to us because we take the time to help them understand. Now that I have you totally confused lets talk about another optional dilemma.
FULL TORT vs. LIMITED TORT - a tort is a civil wrong that someone does to someone else.
You’ll see somewhere on your Auto Declaration Sheet what you selected... If it says "Full Tort" that means you have all your rights under the law to sue for pain and suffering. If you see “Limited Tort” that means you limit your right to sue someone under the law and because you did, your premium is less then what it cost for "Full Tort". For further details on this consult your Insurance Agent or Personal Attorney. I will tell you that approximately 80% of our clients have Full Tort and 20% have Limited Tort. This is an individual choice depending on many different set of circumstances, there is no right or wrong here as long as you are making an informed decision and understand completely what’s at stake.
FIRST PARTY BENEFITS: On your Policy Dec Sheet you’ll see Medical Expense of either 5,000, 10,000 on up to 100,000. Before I go further, you are the First Party! So, these benefits are for you! The minimum by law is 5,000 under Medical. So, if in fact your in an accident, get hurt and have medical bills, the Insurance Company will pay out up to 5,000 dollars. If your bills exceed 5,000 your Major Medical would start picking up the bills subject to your own personal plan and various deductibles. What if I wasn’t at fault? It doesn’t matter; by law your first party medical benefits are your primary benefits no matter who’s at fault. Other first party benefits consist of Income Loss and Accidental Death and Funeral Benefits. They are all optional and can be waived, talk these over with your Agent.
COMPREHENSIVE/COLLISION - Here is where you get the Physical Damages Coverage for your Car subject to the deductible that you choose. Comprehensive are things like fire, smoke, vandalism, glass breakage, theft, flying objects, hitting an animal etc. Collision is colliding with another Object like a car, mailbox or even a house. You have separate deductibles for each one.
Check with your Agent to see whether or not you’re wasting your money on a car that is more then eight years old.
OTHER COVERAGES: Look and see if you are interested in reimbursement for a rental vehicle and whether or not you have that coverage. Also, check on Road Service in case you need your car towed. If you’re leasing a vehicle you might look into having the car paid off if you are upside down on your lease. Ask your Agent about it.
Now that you are bored to tears with this article, even though it’s quite informative, I think I’ll confuse you about your Homeowners Policy in the next edition. Seriously, if you have any questions or concerns call us, we’re here to serve you and the community and keep Auto Insurance affordable and help you understand exactly what you pay a premium for...
Auto Insurance - Pull your Auto Policy out this weekend and look at all the funny abbreviations that have a way of mixing everybody up that tries to interpret them.
