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Auto Insurance

QUESTION:My insurance agent said I have "full coverage" on my car. That means I'm fully insured if I get in an accident, doesn't it?

ANSWER:When I ask a potential client what kind of insurance coverage they have on their car, an answer I hear with frequency is "my agent said I have full coverage". The problem with this answer is it really doesn't tell me anything about what coverage the client really purchased. The term "full coverage" can have different meanings to different people.

In Florida, there are only two types of coverage that the law requires every driver to carry. These are property damage liability and personal injury protection, PIP for short. Other types of coverage which can be purchased would include at least the following:

  • Bodily Injury Liability
  • Medical Payment Benefits
  • Uninsured Motorist Coverage (stacking and non-stacking)
  • Collision Insurance
  • Comprehensive Coverage
  • Towing & Labor
  • Rental Reimbursement
  • Gap Insurance

As you can see, if the "full coverage" you thought you were buying consists only of the state mandated insurance, you could be badly underinsured. Not only that, but you might be paying far too much! More on cost later.

To begin to understand the coverage your current policy provides and to determine the coverage you should have, it's necessary for you to know what each of the foregoing types of insurance provide.

First I'll discuss the state mandated minimum.

PROPERTY DAMAGE LIABILITY: Where you, or the person driving your car is at fault for an accident, this coverage pays for the damage to the other persons car or for damage to other types of property that might have been damaged such as street lights, fire plugs and even building damage. It does not pay for damage to your own car, regardless of who was at fault for the accident.

State law requires you to purchase at least ten thousand dollars in property damage liability coverage. If this is the full amount of such coverage you elect to purchase, however, your insurance company will pay no more than ten thousand dollars to settle all property damage claims brought against you because of a single car wreck. If the other driver was operating a new car of almost any make that was a total loss, or if your accident caused damage of any significant degree to two or more cars, you can easily see that insurance limits of only ten thousand dollars will leave you badly underinsured.

How much coverage you purchase is largely governed by how much you can afford. If you own a car, however, you will be required to purchase and maintain at least ten thousand dollars in property damage liability insurance.

Caution: If you purchase coverage in order to pick up your tags, but later let your coverage lapse by failing to make the required monthly payments, your insurance company will notify the state, and a suspension letter will be mailed to whatever address is on your driver's license or registration. Remember, driving on suspended tags or a suspended driver's license can give rise to criminal charges, not just a traffic ticket. So make sure you make all your payments on time, and keep a written record of each such payment in case a dispute arises.

If you move, it's important that you let division of driver's licenses and your insurance company know of your new address since they are only obligated to send notices to the last address you provided to them.

If your insurance company sends a notice telling you your insurance is being cancelled, non-renewed or has lapsed, or if the state tells you your tags or driver's license has been suspended, don't assume they've just made a mistake and everything will be taken care of. Take care of the matter immediately, and make sure you retain proof that the problem has been resolved. Verbal assurance "not to worry" don't count for much when trouble comes your way.

PERSONAL INJURY PROTECTION (PIP): This is the second type of coverage mandated by state law. PIP pays for 80% of your medical bills and 60% of lost wages without regard to which party was at fault for the accident. Most policies provide $10,000.00 in coverage, though higher limits are available. Keep in mind that this ten thousand dollar limit does not apply separately to lost wages and medical bills. Once your combined medical bills and lost wages reaches the limit of your coverage, no further payment will be made.

When purchasing PIP insurance you may choose a deductible of up to two thousand dollars. When PIP deductibles were proposed, the legislature reasoned that those with health insurance could select a large deductible (with health insurance paying those medical bills subject to the PIP deductible) thereby lowering the cost of their auto insurance.

In practice, however, many of those who elect to carry large pip deductibles have little or no health insurance and therefore can least afford to incur medical expenses which they will then be required to pay from their own funds. In addition the cost of a policy without a PIP deductible is frequently little more than a policy subject to a two thousand dollar deductible.

I strongly recommend that my clients carry full pip coverage with no deductible whatsoever. In addition, when purchasing insurance, read your application before signing it to be sure your getting what you asked for. With some insurance agencies, their application form is often pre-printed to indicate the choice of a large deductible.

Your agent may not force you to elect to carry a PIP deductible. If you are quoted a price for a policy that provides full coverage that is much higher than one that contains a two thousand dollar deductible, your best bet is to obtain price quotes through a different agent or company. When it comes to purchasing auto insurance, the best advise is to shop around. Prices vary greatly from one company to another for identical coverage.

Caution: Current law requires you to submit a claim for PIP benefits to your insurance company and obligate your doctor to submit bills for treatment within a short time after you first seek medical care Failure to abide by these time limits may allow your insurance carrier to deny your claim. As a general rule, if you're seeking treatment because of a car accident, make sure your doctor, hospital, chiropractor, therapist or other health care provider is given a copy of your current insurance card and your health insurance card on your very first visit. This will allow their staff to comply with the strict time limits imposed by law.

Caution: As a condition for paying your medical bills or lost wages, your automobile insurer can require you to provide them with a sworn statement under oath and be examined by a doctor of their choice. Such a request often indicates that your carrier is either questioning the validity of your claim, or is seeking a way to deny further payments to you or your doctors. Nevertheless, if you fail to comply with either demand, the insurance carrier can and frequently will deny the claim altogether.

Caution: If your PIP policy contains a deductible, when you submit your medical bills to your health insurance carrier for payment, they will often deny the claim, instructing you to submit the bill to your auto insurance carrier. This is because PIP insurance is required to pay for your medical bills first with your health insurance carrier picking up coverage only when PIP is exhausted.

Where this occurs, ask for a copy of your "pip payout log" from your auto insurance adjuster. Send a copy of this log to your health insurer with a letter explaining that the bills submitted to the health insurer for payment were not paid through pip because of your deductible. In most cases this solves the problem.

Caution: Keep track of your total medical bills so you know when your PIP benefits are exhausted at which time further bills for treatment become your responsibility. Even if you assume your attorney is "taking care of everything", medical bills not otherwise paid by insurance are still your obligation.

BODILY INJURY LIABILITY: This coverage is not required by law but should be included in your policy if you can possibly afford it. Often referred to by its shorthand name of "BI coverage", such insurance pays for injury claims brought against you by someone who has been hurt in an automobile accident because of your negligence or the negligence of anyone driving your car with your permission. Of equal importance, if you carry this coverage and you're sued for injuries, your insurance company will provide you with an attorney free of charge, and will also pay all the costs of your legal defense.

BI coverage comes in varying amounts, starting at ten thousand dollars, and is sold in the form of either single limits or combined limits. The lowest level of coverage is in the amount of $10,000.00 per person, $20,000.00 per accident. A policy providing this level of coverage will pay up to ten thousand dollars to any one person who claims injury but no more than twenty thousand dollars regardless of how many claims arise out of a single accident.

For example, if three people bring claims against you, any one of those people can be paid up to ten thousand dollars but once the company has paid a total of twenty thousand dollars for one particular accident, no further claims will be paid. Obviously, where two of three injured claimants are each paid the maximum amount of ten thousand dollars (for a total of twenty thousand dollars paid) there will be no coverage remaining for the third claimant. Similarly, the insurance company might pay ten thousand dollars to the person who is most injured and five thousand dollars each to the remaining two claimants thereby fully resolving all three claims.

Coverage can be sold as 'single limit coverage". For example, if the policy provides for single Bodily Injury Liability limits of fifty thousand dollars, any one person can be paid the entire amount of coverage, or that same fifty thousand dollars can be divided among whatever number of people are claiming against you for injuries.

I'm frequently asked how much BI coverage is enough. Unfortunately, there is no set answer to such a question. I recommend, however, that everyone buy at least the minimum amount of bodily injury liability insurance available, especially since having purchased at least some BI insurance your carrier will pay for an attorney to represent you in the event you're sued.

In addition, while you don't have to purchase bodily injury liability insurance in order to drive a car, if you're involved in an auto accident where you're at fault, the financial responsibility laws of the state of Florida direct that your driver's license and tags be suspended until you make satisfactory arrangements to pay for the injured person's losses yourself. For details, see Florida Statute Chapter 324 known as the "Financial Responsibility Law".

After being involved in an accident without carrying bodily injury liability insurance, you'll be required to purchase BI coverage anyway in order to have your driving privileges reinstated. Under those circumstances, however, such coverage will be extremely expensive and difficult to obtain.

MEDICAL PAYMENT BENEFITS: Because PIP only pays eighty percent of bills for accident related medical care, a supplemental coverage is available to pay the twenty percent not otherwise covered by PIP. Most insurers refer to this insurance by its shorthand name of "Med Pay". Med pay is available in different amounts, often beginning at $5,000.00 and going up to as much as $100,000.00. All auto companies will offer at least some medical payments insurance, though the amount available differs from one company to another. The cost of such insurance is usually very reasonable.

In addition to paying that portion of your medical bills not covered by PIP, medical payment benefits can also pay your medical bills once your pip coverage is exhausted. It is also possible to have your insurance carrier to preserve all or most of your PIP coverage to pay for your lost wages while your 'med pay" takes care of all your accident related medical bills.

Caution: If you wish to pay your medical bills from your med pay coverage and reserve your pip coverage in order to pay your lost wages, you need to notify your adjuster, in writing, as early as possible. Even then, if you've already "assigned" your insurance benefits to a doctor or hospital, your insurance carrier is obligated to honor that assignment and may not be able to reserve pip benefits for payment of lost wages.

UNINSURED MOTORIST INSURANCE: This coverage, often called "UM" pays for your own injuries and losses when you've been hurt through the negligence of another driver but only if that driver failed to carry bodily injury liability coverage of his own, or didn't carry enough BI coverage to fully compensate you for your injuries.

Uninsured Motorist Coverage will also pay for your injuries where the at-fault driver leaves the scene of the accident and cannot be identified, though most policies require that you immediately report the accident to the police in this situation.

Uninsured motorist insurance can only be purchased only if you've elected to purchase bodily injury liability coverage, as well. You may purchase the same limits of uninsured motorist coverage as you purchased in bodily injury liability insurance. Therefore, if you purchased split limits of $100,000.00 per person/ $300,000.00 per accident in BI coverage, you must be offered the same amount of UM coverage, though you are free to purchase less.

If you choose not to purchase Uninsured Motorist Insurance, or choose lower limits of UM coverage than you carry in BI liability insurance, your agent must obtain your written waiver in order for you to make such an election. Otherwise, the law will mandate that your insurance company provide you UM coverage equal to your BI limits in the event you are later injured and wish to make an uninsured motorist claim.

Uninsured motorist coverage can be purchased as "stacked" or "non-stacked". If you own and insure two or more cars and you purchase a "stacked" UM policy, to determine the amount of coverage available to you in the event of a loss, you would add together the coverage on each vehicle and the total on all would be the total coverage available to you.

For example, if you purchase a fifty thousand dollar UM policy with stacked coverage on all of the cars in your household, and assuming you own three cars, the total amount of coverage available to compensate you for injuries caused by an uninsured driver is one hundred fifty thousand dollars ($50,000 x 3 = $150,000.00).

Caution: If you buy insurance but choose not to insure some of your cars, if you're involved in an accident while driving a car which is uninsured, you may find yourself with no coverage of at all. Therefore, make sure that all cars in your household are insured with proper coverage.

Caution: Applications for insurance ask many questions, including information about any tickets that you or family members have received, accidents you've been involved in and the names of all licensed drivers in your household. If you fail to answer all of these questions in a truthful and accurate manner, in the event of an accident, your insurance company may have grounds to deny your claim. This is true even where your agent might encourage you to answer a particular question in a less than truthful manner. Likewise, you should not sign an application where the answers to some questions are left blank, because someone may come along later and provide inaccurate answers to those questions which you left blank. If this happens, you're the one that will suffer the consequences of losing your insurance just when you needed it most.

COLLISION COVERAGE: This pays to fix damage to your own car, subject to any deductible you've chosen.

If you were not at fault for the accident, you can elect to have the other driver's insurance company pay to fix or replace your car, in which event, you will not have to pay for a deductible.

In addition, where the other driver's insurance company pays to fix your car, you're entitled to a rental car for the period of time necessary to fix your car, so long as that time is reasonable. Your own insurance company will pay for a rental car only where you've purchased a separate coverage called rental reimbursement.

Insurance companies can help locate a rental car for you at reasonable cost.

Where a rental car's been promised, you should ask that the insurance carrier pay the rental car company directly, rather than requiring any payment or guarantee of payment by you in advance.

You usually come out better if the other driver's insurance company pays to fix your car and provides you with a rental car. However, where the other driver challenges your version of the accident claiming instead that you were at fault, convincing the other person's insurance company to pay your claim may be an impossible task. In addition, some companies just aren't very reasonable when asked to pay claims.

Where this happens, its best to turn back to your own insurance carrier rather than allowing your car to sit idle. If your insurance carrier believes it can prove the other driver was responsible for the accident they will attempt to recover their own payment together with your deductible from the adverse driver's insurance company.

Caution: If you allow your car to sit in a commercial storage yard, significant storage fees can accumulate. Most insurance companies will not pay excessive storage charges, since the law requires you to take steps to minimize your losses. In addition, if storage fees remain unpaid for too long, the storage yard can actually sell your car at auction in order to pay the accumulated charges.

COMPREHENSIVE COVERAGE: This pays for damage and loss to your car which are caused from events other than a collision. The perils insured against are listed in the policy, and include such things as hail or flood damage, theft and vandalism. As with collision coverage, comprehensive can be purchased with a deductible to hold down premium costs. Collision and comprehensive coverage are typically sold together and will be required whenever you finance the purchase of your car with a new or used car loan.

Caution: If there is an outstanding loan on your car, and you fail to keep your collision and comprehensive coverage in force, your lender will purchase sufficient coverage to insure their own interest in the car and will add the cost of such insurance to your loan. Insurance purchased in this way usually provides you with no protection whatsoever, and frequently costs far more than insurance purchased on your own.

TOWING & LABOR: It's name describes the coverage provided. While such insurance usually costs very little, if you have AAA or other plans that already cover towing of your car, you may not want to add this to your auto policy.

RENTAL REIMBURSEMENT: If you were not at fault for the accident, and if the at-fault driver carried property damage liability insurance in a sufficient amount to pay all property damage claims presented, you are entitled to recover the reasonable cost of a rental car during the time needed to repair or replace your damaged vehicle. However, if the other driver did not carry state required property damage liability insurance, if the at-fault driver's coverage is insufficient to pay every claim, or if you or the driver of your car was at fault for the accident, you won't be able to get a rental car from the other driver's insurance company.

By purchasing rental reimbursement coverage your own insurance company will provide you with a rental car following an accident. Such coverage, however, is usually limited to a specific dollar amount per day, up to a set number of days, usually thirty, but for no more time than the amount necessary to repair your car or to find a replacement.

Note, if you purchased comprehensive coverage, there is a separate provision in your policy that pays for a rental car in the event your car is stolen. The amount of money paid per day, and the number of days during which you'll be entitled to a rental car due to theft may be the same or different from the "rental reimbursement" payable in the event your car is damaged in an accident.

GAP COVERAGE: This can provide valuable protection where you lease or finance your car especially where you've made a very small down payment. Collision coverage pays the cost to fix your car or the value of your car immediately before it was damaged in a car accident. Where the car is a total loss, the amount your insurance company must pay could be less than the amount you still owe on your car loan, or the amount you're obligated to pay under your lease agreement in such a situation. If your policy doesn't include "gap coverage" you may have to pay the difference.

Gap coverage protects you from this situation by paying the difference between the value of the car and the amount owed on your lease or car loan, in the event of a total loss. This insurance is fairly inexpensive and should be given serious consideration. If you're not sure that your current policy provides this coverage, ask your agent.

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