Think About it: You Need to Buy Insurance to Protect Yourself, Passengers, and Family Members by Purchasing Underinsured Motorist Coverage (part 4 of 4)

One serious mistake is to decline UIM coverage. Some companies require that you purchase UIM in same amounts as liability insurance. However, many companies, depending upon state law, are authorized to sell denominations of UIM coverage less than liability limits. The insured thinks that he is providing some satisfactory minimal coverage for his family and decides to save some money with lower UIM limits. However, UIM is probably most important place to spend money.

You are not as likely to cause an accident, as you are to be a victim of an accident. At least if you are taking time to read this article, you are probably a person who will exercise more care and judgment in your driving than ordinary person. Therefore, it is more likely that you will be making a claim against another person for injuries sustained by you at hand of third party tortfeasor. In this instance, tortfeasor may (but likely will not) have sufficient insurance to cover you and your passengers for all of your medical expenses, wages loss, and general damages. If not, then tortfeasor is said to be “underinsured”. In that instance, balance of value of your claim, above bodily injury policy limits of tortfeasor, is responsibility of your own company’s UIM coverage.

A third possibility is if tortfeasor is uninsured. This is a distinct likelihood if someone who is reckless, or who has a drinking problem or who is driving with a suspended license involves you in their traffic habits. They caused you and your passengers harm, but they have no insurance. You will be making your entire claim under your UIM polity limits.

All too often, we have seen serious injuries to individuals and their families receive little or partial compensation because insured elected to “save money” by not purchasing maximum UIM coverage available to him. Purchase as much UIM coverage as you can.

Be Honest

A word of caution in dealing with your insurance company: don’t try to fool them on any of information requested, or by insuring only one driver for each of family vehicles. We have numerous cases holding that one family member is not covered because he or she was not named as a driver of another family vehicle. Questions of whether vehicle was “available for regular use” of any individual are complex issues, and history tells that you will lose. Disclose full number of drivers and you will have knowledge that you and family members are covered.

The same thing pertains to marital status and student status of children. Our recommendation is to be honest in your application and in your relationship with your company. The few dollars you “save” otherwise will never be a bargain should you loose out in long run. A contract entered into with materially fraudulent representations can be voidable by company under some circumstances.

Table of Insurance Coverage Requirements, by State

Most states require that you have liability insurance. This covers you when you're at fault in an accident. If you live in New Hampshire, South Carolina, Tennessee or Wisconsin, you aren't required by law (yet) to have liability coverage. For rest of us, mandatory coverage varies according to state. In chart below, minimum liability limits are read as follows (in thousands of dollars): bodily injury liability for one person in an accident/bodily injury liability for all people injured in an accident/property damage liability for one accident.

So, for Alabama, minimum requirements are $20,000 of bodily injury liability for one person, $40,000 bodily injury liability for all people and $10,000 property damage liability.

StateRequired coverage typesUninsured/Under-insured Motorist Coverage Required?Minimum liability limitsNo fault?

12.Wage Loss PIP payment: Pays part of wages not earned due to claimant's inability to work as result of an injury that are covered under personal injury insurance policy. But please note common restriction: this clause usually only kicks in after an absence from work of two consecutive weeks, and then, it pays only a percentage—usually 85%— of actual lost wages.

13.Medical Pay (MED/PAY): This policy pays medical bills of covered driver, family members, and passengers when injured in an accident, regardless of who was at fault. This coverage is required in some states, but not in others.

14.Collision Coverage: This policy helps pay for repairs or fair market replacement cost if your car is damaged in an accident caused by you or an authorized driver. This policy is always optional.

15.Comprehensive Coverage: This policy covers cost of repairs to or replacement of your vehicle should it be stolen, vandalized, struck in a hit-and-run, or damaged by an "act of God." Covered events vary from policy to policy but usually include fire, flood, and falling objects. This policy is always optional.

16.Deductible: It's amount of money that you agree to pay before a certain auto insurance policy kicks in. Deductibles are designed to cut down on insurance costs by eliminating small or frivolous claims. The higher deductible you're willing to pay, lower premium you earn. Collision and comprehensive policies almost always carry deductibles, and sometimes PIP and medical payments policies do too.

17.Actual Cash Value: ACV - An insurance valuation method used for automobiles which is based on cost of repairing or replacing damaged auto with one of like kind and quality, or its replacement cost less physical depreciation. The replacement cost is based on market value replacement cost, which varies by geographic region. 18.Fair Market Value: The price determined by marketplace. It is price a willing and qualified buyer will pay to buy, at which a willing seller will sell. Note that asking price of ads is not necessarily market price.

19.Exclusions: Situations that are not covered by a given insurance policy; specific exclusions are listed on your insurance policy.