Trusted Voice® Blog

Wednesday, February 24, 2016

Auto Insurance Coverage: You Have It, But Is Your Coverage Adequate?

Time and time again, I have found the answer to this question is no.  The problem is, people typically come to me after an accident has occurred and at that point in time it’s too late – they’re stuck with the coverage they have.  In this blog, I will explain some important types of coverage and make some recommendations.

Bodily Injury coverage, commonly referred to as BI coverage, is critical because it protects you in the event you are negligent and injury someone else.  Negligence is simply the failure to act reasonably or to exercise due care under the circumstances.  Some examples: you run a stop sign; you fail to yield the right-of-way; you are driving too fast given the snowy road conditions.  Assume you’re negligent, someone is injured as a result, and you have minimum BI coverage of $25,000 (that’s all that is required in New York).  Your insurance company is only required to pay up to $25,000 to the injured person.  If a jury awards the injured person $500,000, you are personally on the hook for $475,000 (the injured person can look to your personal assets to recover the remaining $475,000).

Let’s change that scenario around a bit.  Suppose you are the one injured (to the tune of $500,000), the other driver was negligent, and he has BI coverage of $25,000.  You go to trial and get a $500,000 verdict. The other driver’s insurance company only has to pay $25,000 of the verdict since that is the amount of his BI coverage. Sure, you can go after the other driver’s personal assets in an attempt to collect on the remaining $475,000.  But what if he doesn’t have any assets to collect from which is usually the case? What if he files bankruptcy discharging his obligation to pay even a penny of the remaining $475,000 verdict?

There is a much easier solution to this predicament if you have the right amount of Supplementary Underinsured/Uninsured Motorists coverage (“SUM coverage”).  This coverage protects you when the negligent party is either uninsured or underinsured.  In our hypothetical, the other driver is underinsured by $475,000 (your injuries are valued at $500,000 and he only has $25,000 in BI coverage).  If you have $250,000 in SUM coverage (and at least that much in BI coverage), you would be able to file an underinsurance claim against your own policy for an additional $225,000.  Trust me, recovering money under your own SUM coverage is much easier than trying to collect against the other driver’s personal assets and can be a real Godsend in these situations.  Determining whether your SUM coverage comes into play, however, is a bit tricky.  It requires a proper understanding of when this coverage is “triggered” under New York law and to what extent. I have seen insurance claims representatives and even some attorneys get this wrong.

The “declarations page” of your insurance policy lists the types and amounts of coverage you have (you should have this, but if you don’t, your agent will provide it upon request). This is where you will find how much BI and SUM coverage you have.  I recommend having at least $250,000 in BI coverage and $250,000 in SUM coverage. More is better. If you have less than these amounts, you will likely be surprised at how little it costs to increase the coverage.

There are other important coverages under your auto insurance policy such as PIP, APIP, OBEL, MedPay, and SSL.  

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