What do all those terms mean in my auto insurance policy? Do I really need all that stuff?

Hoffspiegel Law Blog

When we meet a new client and ask about their auto coverage, there is often no more than a vague understanding of what their coverage is and sometimes even less of an understanding as to what those items mean. Mix that in with a couple of widespread myths and it is apparent that many of us are simply at the mercy of our insurance agents.

While we cannot cover all elements of auto coverage, below are some of the basics, including common misperceptions.

Myth Number One: If they caused the wreck, their insurance company has to pay for my medical care.
While your medical bills are an item of damage and can be claimed in a settlement demand or at trial, the opposing insurer has no duty to pay your bills as they are incurred. For that, you need to look to your own auto policy (if you have selected Medical Payments coverage) or your health insurance, or both. If you have neither you will have to explore other options, which are not covered here.

Myth Number Two: I have everything I need because I have “full coverage”.
The term “full coverage” is used often without having any real definition. Frequently it simply means you have both liability and collision coverage. But people – rightly so – often expect it to mean more. To know what your coverage really is, you must look at the Declarations Page (coverage sheet) for your policy.

In Georgia, all vehicles must have liability coverage with a minimum of $25,000 per person/$50,000 per collision. This is for bodily injury to others in the event you cause injury to another due to your negligence. Is that sufficient? Generally, not. People tend to purchase more coverage if they have assets to protect. While many of us are on a strict budget, think carefully about what will happen in the event you harm someone else, and their injury is serious. If they are not sufficiently compensated, your assets will be exposed. And there is another important reason to consider increasing your liability coverage. You can only get uninsured motorist coverage up to the amount of your liability coverage.

1. Liability
In Georgia, all vehicles must have liability coverage with a minimum of $25,000 per person/$50,000 per collision. This is for bodily injury to others in the event you cause injury to another due to your negligence. Is that sufficient? Generally, not. People tend to purchase more coverage if they have assets to protect. While many of us are on a strict budget, think carefully about what will happen in the event you harm someone else, and their injury is serious. If they are not sufficiently compensated, your assets will be exposed. And there is another important reason to consider increasing your liability coverage. You can only get uninsured motorist coverage up to the amount of your liability coverage.

2. Uninsured/Underinsured Motorist
Nationally, about 13% of drivers, are not insured. That statistic holds true for Georgia. Uninsured Motorist coverage or underinsured motorist coverage (“UM”) is optional coverage you can purchase with your auto policy. It will cover you in two circumstances. First, if you are struck by an uninsured motorist. Second, if you are struck by a driver who has less coverage than your injury merits. As we covered in our last newsletter, UM coverage is inexpensive. Remember that “excess” or “add-on” UM is better than “less than limits” or “reducible” coverage.

3. Medical Payments Coverage
Medical Payments (“Med Pay”) coverage will cover 100% of your bills relating to the collision, up to the amount of coverage provided. If you have health insurance, it can be used to coordinate with your health coverage for deductibles and co-pays. If you don’t have health insurance, it can be invaluable if you are injured and have no other options. And it covers you even if the wreck was your fault. Med Pay coverage is available in smaller or larger increments — some carriers will only provide $1,000 while others may offer as much as $50,000.

There is generally a deductible of $250 to use your UM coverage to cover physical damage to your vehicle. In the event you have a collision and the liability insurer is slow to respond and you need to get your vehicle taken care of, you may choose to go through your own carrier, if you have collision coverage. There will generally be a deductible, anywhere from $250 to $1,000. If you can afford to lay this money out, you may wish to do so. Most of the time you will be reimbursed within a few months. Insurers have an arbitration system and most of them participate. The case will be heard, without you even knowing about it, and more often than not, you will recover your deductible.

There are many more coverage items, such as rental, towing wage loss, gap coverage, umbrella coverage and others. We will cover those in a future newsletter. The bottom line is that more is better, depending on your own needs and financial circumstances. But since you are responsible for yourself and possibly others, ask questions of your agent and let them know that you need to be covered if struck by an uninsured or underinsured motorist.

If you have any questions about anything we have written about here, please do not hesitate to reach out to Lloyd or Alex.

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