Do you know what insurance you actually have on your car? What are you really paying for? What does it cover? What does that really mean? Many people don’t know. Would you believe that about a quarter of cars out there are uninsured? It’s true, and that percentage is actually going up.
Insurance Policy Limits
Understanding your insurance policy’s “limits” could save you tens of thousands of dollars. It can also protect you in the event of an accident. If you’re currently only paying the smallest dollar amount that is legally possible, your insurance will only cover the other driver. It won’t cover you. The legal minimum insurance amount varies by state, but the truth is, it’s not enough in any state. $25,000 per accident is the lowest you can pay in Montana. If you get in an accident in Montana, and you are at fault, your insurance company will contribute $25,000 at maximum to settle the other person’s claim. But what if the other person is seriously injured? If your insurance limit is too low to cover the other driver’s claim, they can sue you for whatever your insurance didn’t cover. And they probably will.
Understanding Insurance Policies
I frequently talk to people who don’t fully understand the coverage they pay decent money for. Unfortunately, most people’s coverage isn’t good.
So what can you do? Ask your insurance company for your plan’s declarations page. That’s the one that shows you exactly what your coverage is. Still, the majority of people aren’t insurance experts– they don’t know what all that information actually means. And how would they? It’s not like anyone teaches us these things when we’re in school.
Just understanding the insurance process and having adequate coverage can save you dollar amounts into the thousands if you’re unlucky enough to get in an accident. The worst part? Because insurance companies can’t make money off of coverage that actually gives money back to you, insurance agents won’t explain this to you. I will.
How Much Coverage Do You Need?
The Bodily Injury Limit
Let’s get a couple of things straight. The limit that an insurance company can pay to the other driver after an accident is called the bodily injury limit. If you injure another person while driving, and they decide they want a settlement for an amount greater than your policy’s bodily injury limit, you’re in trouble– especially if they decide to take the case to court. Unfortunately, I know this because I’ve seen it happen to people time and time again.
So how much coverage do you need? I recommend making sure your insurance covers $100,000 / person at the very least. Of course, you’d be even safer if that amount were more, but most claims won’t have more than a $100k settlement value.
Uninsured & Underinsured Motorist Coverage
Uninsured Motorist Coverage (a.k.a. UM) works by covering YOU if the other driver is uninsured. (Remember, 1 in 4 cars on the road is uninsured.) When you sign up for this kind of insurance, you’ll have a maximum amount YOU can collect from your insurance company if someone who doesn’t have insurance hurts you while driving.
In some states, UM is combined with the rest of your insurance policy. In some states it’s separate. Read your policy language carefully and make sure you know what you’re getting.
Again, I recommend a maximum coverage of at least $100,000 for a UM policy and more if possible.
Underinsured Motorist Coverage (a.k.a. UIM) is another great option for protecting YOU and your loved ones. What is it? Imagine another driver hits you. He does have insurance, but it’s minimal coverage. Let’s say your insurance claim is worth $30,000, and the other driver’s coverage is only $25,000.
That’s when your UIM takes effect. You’ll recover his $25k, plus you’ll get your UIM up to the amount of your coverage. So, if you have $100k in UIM, you’ll have $100k plus the other driver’s policy limit available to you.
UIM is one of the most important insurance policies you can get to make sure you’re protected in the event of a serious accident. I recommend you get a policy for the most (within reason) that you think you can afford.
Medical Payments Coverage
Medical Payments Coverage (a.k.a. Med Pay) is something most people don’t have. In fact, most people don’t know what it is, but it’s another extremely important option.
My recommendation is $25,000 per accident at minimum. The best thing about Med Pay is that it will pay for your related medical expenses regardless of who is legally at fault. If you get injured as a result of an accident you are responsible for, Med Pay will still pay your medical bills, and you won’t have to ever repay that. Even better, this kind of coverage doesn’t rely on Medicare approval– it just pays your bills.
If the other person is at fault and you’re injured, Med Pay still pays only your medical bills (not the other person’s)–even though that person’s insurance company also owes you money for the injuries you received. Just know that some policies do have limits on what they’ll cover, so read you insurance policy thoroughly.
Here’s a simple, hypothetical example of how Med Pay can work:
Bill hit you and the accident was his fault. Because you were injured in the accident, you incurred $25,000 worth of medical expenses (that is sadly not uncommon these days). You want to settle for $50,000 ($25k for pain and suffering and $25k for your medical expenses) from Bill’s insurance company. Note: the amount you collect from Bill’s company doesn’t change regardless of whether or not you have Med Pay.
Let’s say you have $25k in coverage with Med Pay insurance. Your Med Pay kicks in first (and you never have to pay that amount back). After that, Bill’s company gives you $50k. Because you have Med Pay, your settlement is essentially $75k. Both his company and your Med Pay pay the $25k for medical bills. The remaining $50k goes back into your pocket.
Now let’s imagine you have no Med Pay coverage. Now only Bill’s company pays for the medical expenses, which means only $25k goes back into your pocket. Med Pay can make a huge difference.
The bottom line is, Med Pay can put thousands of dollars back into your pocket, and you pay relatively little each month.
If you’d like to talk about Med Pay or other insurance coverage options, get in touch. I can help you choose the best coverage package that addresses your needs, so you can protect yourself and your loved ones when it matters most.
Marty is a former criminal prosecutor in the Cascade County Attorney’s Office and now uses that experience to defend those accused of crimes. A University of Montana School of Law graduate, Marty focuses his practice on personal injury and criminal defense and is a premier DUI defense attorney. He is also well versed in the insurance claims industry and has negotiated significant settlements with nearly every major insurance company.