Do you have adequate auto insurance?

[disneysteve]

InDebtInDC made a comment on another thread suggesting that most people are underinsured on their cars and homes. I agreed about homes but didn't think it was true for cars, but now I'm not so sure. Since it was OT for that thread, I'm starting a new one to discuss the topic in more depth.

So InDebtInDC, please tell us more about what coverage most folks have, why it is inadequate and what coverage we really should have. I certainly wouldn't want to be stuck with some major liability after an accident if better coverage would avoid that.

[InDebtInDC]

Generally speaking, there are several basic types of coverage:

* liability - pays others if you are at fault
* comprehensive - pays you if your car is damaged/stolen while parked
* collision - pays you if your car is damaged in a collision of your fault

There are others as well, but generally insurance companies don't like to pick up tabs for damages other than auto. Typically those claims would be forwarded to the legal department for litigation.

I'll try to confine my comments to auto because medical claims can go well into the millions, especially with multiple fatalities/serious injuries.

Typically when you file a comprehensive or collision claim for a total loss, you will get paid the book value of your car. If you owe more money than it's worth then you should carry loan/lease payoff coverage. There's also a line coverage that pays you back for the original purchase price of the car, but I haven't seen this being offered in the US yet.

If you have collision on top of uninsured/underinsured motorists coverage, you should be okay as far as your car is concerned. If the person who hits you can't pay or pay very little, your insurance will cover the rest up to the book value of your car.

If you carry adequate comprehensive coverage with a low deductible and loan/lease payoff, you should be okay as well if someone totals or steals your car.

Still, if you don't get the full value for your car it's not the end of the world.
The biggest problem is with inadequate liability coverage.

Typically each state will require you to carry some minimum coverage to pay for accidents you cause, but the state minimum is grossly inadequate. For example, in mine the minimum is $50k per incident.

If you cause a chain reaction pileup and they pin it on you, you are responsible for every single car that is damaged.

If you live in an affluent area I strongly urge you to check your liability coverage. Usually affluent people like to go to court (or are lawyers themselves) so you should be prepared.

At most the insurance company will pay up to the amount listed on the policy. Anything leftover you're personally responsible for.

I don't know what a good number would be, but it would be dependent on where you live and the type of driving you do. Obviously if you live in an affluent area you should carry a higher liability limit.

If you live in a rural or impoverished area, you may be able to get away with a lower liability limit, but nothing's a sure thing because cars can go anywhere.

The thing is that most people don't realize is that $100k adds up really quickly. Cars are getting more and more expensive, and chances are if 2 or 3 cars are totaled, you will go over $100k easily.

I think you should pick the highest level you're comfortable with and the corresponding premium you're comfortable with. If you're at the state minimum I would suggest that you consider bumping it up at least a little bit.

[Scanner]

DisneySteve,

I can speak for NJ and working with PIP benefits a lot. We are no-fault so you have a policy maximum of $250,000. Should you exhaust that, you would submit denials to your health insurance company and they would have to pay out.

Now. . .liability. . .I'm not sure what to say about that. The maximum you can buy is 250/500. . .which I think we have. I don't think that would carry you far. As you know. . .we are doctors and doctor's are natural lawsuit targets.

But you can't really buy more.

For this reason that we are natural targets, I carry extra on my homeowners policy. SHould someone slip and fall on my sidewalk, if they found out I was a doctor, they would be more likely to sue and it's only like an extra $30/year to get 250/500.

I'm just uneasy about umbrella policies though - they seem to have too many stipulations attached to them in that you don't know what you are actually buying.

EDIT: I checked. . .here is what we have

Liability: 250/500K
PIP: 250K (required, I think)
Uninsured/Underinsured: 250K/500K
Property Damage: 100K
Collision: $500 deductible

We also have the 30 day rental. And I elected for $400/week vs. $100/week on the disability for not much more.

You'll find sometimes adding a little doesn't cost that much.

Talk to your agent.

[humandraydel]

I'd look into an umbrella policy. Probably never need it, but the peace of mind it offers may be well worth it.

[LivingAlmostLarge]

Definitely, adding a little more coverage when you have lots already is minimal. Probably why we added so much coverage.

We were scared into it. Told they could go against our future earnings and house.

[disneysteve]

The biggest problem is with inadequate liability coverage.

Typically each state will require you to carry some minimum coverage to pay for accidents you cause, but the state minimum is grossly inadequate.

If you cause a chain reaction pileup and they pin it on you, you are responsible for every single car that is damaged.

The thing is that most people don't realize is that $100k adds up really quickly. Cars are getting more and more expensive, and chances are if 2 or 3 cars are totaled, you will go over $100k easily.

I would tend to agree that the minimums are inadequate. I don't even know what the minimum is here in NJ but I know we have more than that.

I'm not sure about the pile-up issue. In most places, I thought, if you rear-end someone, you are at fault regardless of what actually caused the accident, so I'm not sure how they could pin a whole pile-up on one driver.

As for the 100K, unless I wreck a Ferrari or Rolls, I'd probably have to total 2 or 3 cars to do that much damage which I would think is highly unlikely.

Do you know of any stats about what % of drivers only carry the state minimum coverage?

[InDebtInDC]

I would tend to agree that the minimums are inadequate. I don't even know what the minimum is here in NJ but I know we have more than that.

I believe NJ is 15/30/5, but I may not be up to date. You can find it on your state's motor vehicle department or call your insurance company.

I'm not sure about the pile-up issue. In most places, I thought, if you rear-end someone, you are at fault regardless of what actually caused the accident, so I'm not sure how they could pin a whole pile-up on one driver.

This is not true. It depends on factors. For example, if A rearends B while B is still moving, causing B to rearend C, A pays for B, B pays for C due to B's contributory negligence (excessive speed, improper following distance).

If both B and C are stopped a light, and A hits B and pushes B into C, A pays for both B and C since there was nothing B could have done to prevent the accident.

It really depends on the fact patterns of the case, the judge, and how each party wants to proceed.

As for the 100K, unless I wreck a Ferrari or Rolls, I'd probably have to total 2 or 3 cars to do that much damage which I would think is highly unlikely.

Actually, there are quite a few other cars on the road that book over $100k. For example, Land Rovers, BMW, Hummer, Mercedes, Porsche, Jaguar, Lamborghini (I see at least one of this a day while just driving around, sometimes twice a day).

The run of the mill 7series and S class are plenty in my area, and they all drive like idiots.

Do you know of any stats about what % of drivers only carry the state minimum coverage?

I don't have the stats off the top of my head because driver's coverage limit is confidential information in my state.

In my personal experience though, I would say that 50-75% of the fender bender claims I handled come really really close to the policy limit. If there were an extra car involved the insured would have had to pay out of pocket.

Anything over $100k, antiques, motorbikes, fatalities, etc., get sent over to the special claims department and they handle all the high payout claims.

[LivingAlmostLarge]

I agree about expensive cars running around. Everywhere there are tons On our street alone there are 4 landrovers, porshe suv, 3 subaru suv, 3 bmws, 8 audis, ridiculous. If it weren't for our el-chepo professor neighbor our cars are definitely the beaters of the street.

[Scanner]

Remember. . .the liability covers the "pain and suffering", not so much the expensive car.

[Snowgirl]

In my Canadian province, our insurance policy is on a "no-fault" system, meaning that my insurance pays for my own damage, regardless of my responsibility and the other party's insurance. If you carry a debt on your car, the lender requires insurance, and on new cars, most people opt for a "Waiver of Depreciation" for 2 years, in case the car is stolen or totalled. We're also told to get a 2 million liability, in case we cross the border into the United States, because these people are lawsuit happy .

[disneysteve]

Remember. . .the liability covers the "pain and suffering", not so much the expensive car.

My declaration sheet lists "bodily injury" coverage separate from "property damage" and both are listed under the Liability section. I'm assuming "property damage" refers to the vehicle and "bodily injury" refers to the passengers. Is that correct?

[InDebtInDC]

In my Canadian province, our insurance policy is on a "no-fault" system, meaning that my insurance pays for my own damage, regardless of my responsibility and the other party's insurance. If you carry a debt on your car, the lender requires insurance, and on new cars, most people opt for a "Waiver of Depreciation" for 2 years, in case the car is stolen or totalled. We're also told to get a 2 million liability, in case we cross the border into the United States, because these people are lawsuit happy .

Even under a no-fault system, you can still be found liable. Anybody can sue anybody for anything under our system.

[InDebtInDC]

My declaration sheet lists "bodily injury" coverage separate from "property damage" and both are listed under the Liability section. I'm assuming "property damage" refers to the vehicle and "bodily injury" refers to the passengers. Is that correct?

Liability covers anything you are legally liable for. It can include property and bodily injury. Remember that these two lines of coverage may have different limits.

Property typically means anything that's tangible asset with a replacement value. Bodily injury typically means injury to persons, medical bills, lost wages, etc.

Typically insurance companies do not like to pay pain and suffering because it's hard to put a value on those things. Usually you will have to file suit and go to court/settle to get this kind of payout, subject to the liability limit.

Anything leftover after the limit is reached you are personally responsible for.

[disneysteve]

Typically insurance companies do not like to pay pain and suffering because it's hard to put a value on those things. Usually you will have to file suit and go to court/settle to get this kind of payout, subject to the liability limit.

Anything leftover after the limit is reached you are personally responsible for.

My wife and daughter were in an accident in 2002. My daughter suffered permanent injuries. As a result, we consulted our attorney and did file a suit. Because my wife was one of the drivers and was deemed at fault, I was technically suing my wife on behalf of my daughter. My daughter did win a settlement that exceeded the liability limit of the policy, but my wife didn't pay it. The insurance company paid it. It didn't cost us a penny. Didn't even raise our auto insurance rates because our company forgives the first accident.

[Snowgirl]

Even under a no-fault system, you can still be found liable. Anybody can sue anybody for anything under our system.

In this province, the system removes all rights to so for car accident! We all carry liability for trips outside, though.