The Law Center

Understand Your Car Insurance Coverage

My experience as a Pennsylvania personal injury attorney is that people don’t understand car insurance.  They either over-pay for options on their policy that they don’t need, or they waive inexpensive policy options that can really be helpful when you need it.   Are you one of those people?  This article provides information about five decisions that you have to make when you choose your car insurance, and what you should know about each option.

The first car insurance option that needs to be discussed is “the tort option” (lawsuit option):  full or limited in PA.   Many people waive their right to sue and don’t realize it, even though there’s a form telling you what you’re doing.  Other states have a similar law, like New Jersey.  People give up this valuable right to sue because they say to their agent, “l want to spend the least amount possible.  Give me bare bones coverage.” 

I understand that affordability is critical for a lot of people and I understand the desire to keep your car insurance as inexpensive as possible.  But if you need to get the least expensive insurance possible, it’s important to waive rights knowingly and willingly and understand what you’re giving up. 

This “limited tort” discount is a small, and what you give up is really big.  You waive your right to sue for pain and suffering unless you have a serious and permanent injury in order to sue.  What’s not explained to you is that pain and suffering is a big part of a law suit, and permanency is a small percentage of car accidents.  A lot of people say, “That’s ok, I don’t need to sue unless I’m seriously hurt.”  The thing is that you can be seriously injured for a long time, and if its not permanent, you can’t sue for pain and suffering.  That’s a steep price for a small discount.  So if nothing else, weigh the price difference carefully before you give up this right.

If you stop paying insurance because your car doesn’t work any more without un-registering your car, you also waive your right to sue for pain and suffering.  Don’t just stop paying your car insurance if your car dies.  Instead, first contact your state department of motor vehicles and unregister your vehicle before you stop paying for your car insurance. And the penalty doesn’t just apply to you; it applies to every family member in your home as well. 

Second option:  How much liability coverage and protection should you get?  The minimum in Pennsylvania is $15,000. As a general rule you, get should select coverage limits up to the amount of equity that you have in your home.  The reason is that you don’t want to have to take a home equity loan to pay a civil judgement.  You want to have the insurance so no one takes your house.  If there’s a judgement for  more than the value of the house, you’re still protected because you can declare bankruptcy.

Third policy option:  uninsured (UM) or underinsured motorist (UIM).   Uninsured motorist coverage is exactly what it says.  Your car insurance policy will protect you if you’re hurt by an uninsured driver, or in a hit and run accident.  Insurance companies are required to offer you this coverage in the same amounts of your liability limits, and it you only can lower these limits in writing on a special insurance form.  I recommend having the highest limits of UM  possible, particularly in crowded, urban, and low income areas where there are a lot of  motorists who can’t afford insurance. Unless you ask for lower (which I don’t recommend), you get the same amount as your liability coverage.

Underinsured coverage is the part of the policy that pays you if you are hurt by another driver who has a little, but not enough coverage to pay your damages.  In Pennsylvania, people are only required to have coverage as of $15,000, but if your seriously hurt, that wont pay a fraction of you damages.  UM and UIM coverage come together (you don’t choose one or the other).   The key is NOT to waive, or reduce it.   The reason: why would you want pay more insurance protection for strangers than for yourself or family members?  This coverage is inexpensive in proportion to the value you get when you need it, which is why I don’t recommend waiving this coverage.

Another part of the UM/UIM coverage is the stacking option.  “Stacking” is multiplying your UM/UIM limits by the number of cars you have.  Just like limited tort, it can only be waived or reduced in writing on a special form.  I don’t recommend that you give up this extra coverage because for the same reason – keep coverage for injury to you and your family as high as you can.  It has a high value in proportion to its low cost.  If the law requires you to get insurance, get the full benefit.  Before you waive this coverage, call your agent and go through the price differences in detail.  The savings will pale in comparison to the peace of mind it brings.

Fourth option:  collision coverage for property damage, meaning damage to the vehicle.  These claims are much more common even though they majority of property damage claims are less expensive than personal injury claims.   Because they are so much more common, the coverage is much more expensive and insurance companies draw much more profit from the coverage. 

Car insurance is required but collision coverage is not.  The smartest way to save on the cost of a policy is to either refuse collision coverage or to increase the deducible to at least $1,000.  Here’s the big factor:  if you can afford to repair your vehicle with savings and absorb the cost of fender benders, your premiums will drop substantially, and you will save over the long haul.  Do the savings comparison with a calculator.  

To determine just how much insurance companies make on collision coverage, call your agent and do the math.  Figure out how much you would have saved from all the years you’ve driven and didn’t have an accident, and how much you’ve been paying for this coverage.  If your insurance company had paid for a fender bender you caused, subtract the cost repairs.  You probably can buy a car with the savings or at least pay for several accidents from those substantial savings.

Car insurance companies give generous savings on dropping collision coverage or increasing the deductible in part because it creates safer driving, reduces the number of claims, and increases the number of claims that people pay for out of pocket.   The insurance company will pass this savings on to you if you increase your deducible or don’t pay for collision coverage. 

Fifth option: is for “no fault coverage” like medical and wage loss.  When you get hurt in any car accident whether you caused the accident or not, you automatically get covered for $5,000 worth of  medical expenses.   You have an option to increase it and its not expensive.  But if you have other health insurance, your regular health insurance covers bills in excess of $5,000, so it’s something you wont use and don’t need.  You can also recoup medical expenses in a lawsuit.

You also can get wage loss /disability coverage from an auto policy.  If you have a job that requires physical activity where your more likely to miss time from work, that coverage is more desirable to you than someone who works from home. Wage loss coverage is also more desirable if you can’t afford to miss work.

In summary, my advice is to spend some time with your insurance agent to decide what coverage you want.  Although you might think you want the least expensive coverage, you don’t want to be penny wise and pound foolish.

If you’ve been injured in an accident, click the “Request Consultation” button for a free case evaluation.