Buyer beware is a well-known concept that is too often overlooked when buying automobile insurance because few consumers simply don’t know what they don’t know.
Buying automobile insurance is like buying a fire extinguisher for your home: You hope to never need it because its sole purpose is to provide peace and comfort to know you and your family will be properly protected in case of an unexpected accident. Also, you want the best quality for your money, you want to have the right type and quantity, and you need to periodically evaluate what you paid for to ensure that everything is prepared so it all works properly if you ever need it.
To make decisions about what coverage is best for you requires that you have the right information, but for you to get that information you must know the right questions to ask. To do that, you must set aside many common myths and learn how this all works.
First, the myths to dispel: There is no Santa Claus, no Easter bunny and no such thing as “full coverage.” No matter how much insurance you buy, you can always buy more. However, the most frequently overlooked, and very often the most critical mistake, is not how much you buy but rather what type you buy, or worse, what type you don’t buy.
Very often a new client will tell me they have full coverage when they only added emergency roadside hazard and medical payments benefits on top of the legal minimum required. Those folks are shocked when they end up with barely more than a bucket of water when they really needed a fully functional fire extinguisher.
Next, begin your insurance coverage analysis with your declaration page, or dec sheet. This is your insurance coverage menu, which a la carte lists the various types of coverage down the left side and lists the prices for each coverage down the right side.
Most people “order” their insurance coverage by looking down the list on the right side without ever knowing what they are buying down the left side.
The fundamental types of automobile insurance coverage you must understand are:
Many myths or misunderstandings exist with each of these types of coverage; however, to keep this short I’ll focus on underinsured motorist coverage, aka UIM, because when the crash is extremely severe, this is the most important coverage to have, and dollar for dollar, it is relatively the cheapest to buy.
UIM pays your large claim above the other person’s insurance limits. Sadly, too few people buy UIM because it is not required by law.
There are two versions: limits/limits, meaning your limits are higher than the other person’s limits; and damages/limits, meaning your damages are higher than the other person’s limits.
The better version is damages/limits. For example, if you are severely injured, and the other driver has $50,000, and you have $100,000, the most limits/limits will pay is the difference ($50,000) whereas damages/limits will pay up to your full limit of $100,000. Limits/limits will never pay the full coverage shown on your declaration page. If both drivers have the same limits, then limits/limits will pay nothing, even if you bought $1,000,000 of UIM coverage.
There are many uninsured drivers, but there are even more underinsured drivers who can hurt you severely, so the odds that you might need this coverage are significant.
There are many other myths or misunderstandings regarding UIM and the other types of coverage, perhaps for another column. Hopefully, this helps you begin your research so you can work more closely with your agent or broker to find your best plan. Because when accidents happen, it’s too late to upgrade your fire extinguisher.
David Ransin is a personal injury trial lawyer and owner of Ransin Injury Law. He can be reached at email@example.com.
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