SHOPPING FOR AUTO INSURANCE?

BE AWARE OF WHAT YOU’RE BUYING

When shopping for automobile insurance, there are two things to always keep in mind. First, you never want to pay too much. You don’t want to pay for coverage that you will most likely never need. On the other hand, in the interest of lowering your premiums, you do not want to sacrifice your coverage. Lower premiums can mean that your insurance will provide only minimal compensation in the event you are in a serious accident.

Often, when a client comes to us regarding a personal injury as a result of an automobile accident, we find that they were not very well informed when they made their automobile insurance coverage decisions. It is important to take the time to be informed about automobile insurance before you purchase your coverage and before you are involved in any type of automobile accident. Once a client comes to us, it is too late to do anything about their insurance coverage selections.

In this spirit, when shopping for auto insurance, the smart consumer should be educated as to three different areas of coverage which can affect their premiums:

Limitation vs. No Limitation on Lawsuit

Most people do not realize that they have the option of purchasing insurance that does not have any limitation on the ability to sue, or purchasing insurance that does have such limitations. The latter is limited to:

  • The loss of body part
  • Significant disfigurement/scarring
  • Displaced fractures
  • Loss of fetus
  • Any injury to a body part/organ which has not healed to function normally and will not heal to function normally, even with further medical treatment
  • Death

Obviously, such limited coverage is less expensive, but one would be hard-pressed to argue that the cost savings is proportional to the benefits potentially lost.

For example, our firm was involved in a case in which a husband and wife were involved in a car accident. Fortunately, neither was seriously injured. However they both suffered back and neck pain, but neither had an injury that could be classified in any of the aforementioned categories. Because they had selected the “No Limitation” type of coverage, we were able to recover approximately $20,000 for them. Had they selected the “Limitation on Lawsuit” option, they would have received absolutely no compensation for their pain and suffering.

Uninsured/Underinsured Limits

Another factor that affects the cost of automobile insurance is the uninsured/underinsured provision of the policy. This provision outlines the level at which you will be compensated by your insurance company in the event you are injured in an accident involving an individual who is uninsured or underinsured. It also determines the amount of compensation you will receive in situations where another vehicle may have caused the accident, but did not physically impact your car.

Individuals often elect to purchase low UM/UIM coverage, but this is, in most cases, not the wisest approach to take. A policy that calls for $15,000 compensation per person/$30,000 per accident can be upgraded to a $100,000 per person/$300,000 per accident policy for just about $250 per year, depending on their driving history and other factors. A $250,000/$350,000 policy would cost only about $350/year more. That’s an additional $235,000 worth of coverage per person and $485,000 per accident.

Personal Injury Protection (PIP)

Limits

Lowering your PIP limits can reduce premiums, but this is usually not advisable. To go from $250,000 in coverage down to $150,000 would save you approximately $6.00 per year. This reduction in cost seems hardly worth the lost coverage.

Deductibles

A standard deductible (the amount you must pay before your personal injury protection kicks in) is $250. In theory, you could pay lower premiums by electing to raise the deductible, but in most cases, this would not make good sense. For example to increase that $250 to $500 would only save you a whopping $10.00 per year.

While it’s tempting to opt for the least expensive plan when you are shopping for insurance, you may regret that decision in the event you are injured in an accident. Therefore it’s always a good idea to know exactly what you are buying. Get advice from your insurance agent and/or an attorney with knowledge in this particular area. And don’t be afraid to ask a lot of questions.