Choosing the Right Kinds and Amounts of Car Insurance

May 30, 2018 | Auto Accidents

There are many experienced, knowledgeable and caring automobile insurance agents in our area.  

Most of them and their professional staff do a very good job of explaining to their clients and policyholders the different kinds of automobile insurance that are available and the amounts of coverage their clients should consider purchasing.  

Some insurance agents are affiliated with only one company (State Farm, Nationwide, Erie, etc.), and some are independent agents who represent a variety of different companies. However, with the advent of “online” and discount insurance companies, our experience is that many policyholders never get a proper or thorough explanation of insurance coverages which are available and do not get adequate advice about how much insurance and what types of insurance they should have on the vehicles they own.  

Lack of information can and, unfortunately, often does lead to inadequate insurance coverage, which leads to financial disaster in case of a serious car accident or truck accident, particularly where the at-fault party is uninsured, or underinsured.  

Read on to learn more about types of car insurance you should have and examples of what could happen if you don’t have the right amount. 

PERSONAL FINANCES CAN CERTAINLY DICTATE HOW MUCH CAR INSURANCE A PERSON CAN AFFORD

Virtually every state requires drivers to purchase minimum limits of certain types of insurance.  

West Virginia and Ohio are no exceptions to that rule. For example, in West Virginia, each policy must contain liability limits (in case the policyholder causes an accident) as follows:

• $25,000 per person bodily injury
• $50,000 per accident bodily injury
• $25,000 property damage coverage

West Virginia law also requires every policy to contain uninsured motorist coverage (in case the policyholder is involved in an accident that is the fault of the other driver, and the other driver has no liability insurance coverage at all) in the same amounts as the liability coverage under the policy.  

There are other optional coverages which may be purchased or may be declined. Those include:

• Collision coverage, which insures the car if the policyholder causes a wreck or otherwise damages the car while driving it.  
• Comprehensive coverage, which insures against flood, fire, tree damage, etc.
• Medical payments coverage, which pays a specified amount for medical expenses incurred because of a wreck for the benefit of the insured, members of the insured’s household and guest passengers in the insured’s vehicle.
• Towing and rental car coverage (self-explanatory)
• Underinsured motorist coverage, which supplements coverage for property damage and personal injuries if the policyholder is involved in a wreck caused by someone else who isn’t carrying enough insurance to cover all of the policyholder’s damages

Aside from underinsured coverage, insurance companies aren’t even obligated to offer a policyholder the option to purchase the other, non-mandatory coverages, and the option to purchase underinsured motorist coverage is limited to the amount of liability coverage which the policyholder is carrying under the policy.

It goes without saying that each type of insurance purchased costs money. There are many people who can barely afford to buy the mandatory coverages required by law, let alone optional coverages that are available. For those people, those optional coverages more than likely will never be purchased; however, there are a lot of drivers out there who could afford to buy more insurance coverage and who would buy it if they understood how important it is. There are also many people who might choose to buy different types of insurance than those which they currently have under their policies if they only knew the relative importance of those coverages in relation to their expense.

So, while many people are forced to buy insurance based on limited finances, there are many others who just simply don’t know what to buy or how much to buy. Those who have good agents, who take time to explain coverages to them, more than likely understand these choices.  Those who are insured from some online or discount company may have no idea.

CHOOSING OPTIONAL COVERAGES – SOME CHOICES MAKE MORE SENSE THAN OTHERS

Once the different types of insurance are understood for what they are, what they cover and what they don’t cover, a policyholder is more likely to make an intelligent decision about insurance purchases. But there are many, many examples of where well-meaning policyholders buy the wrong coverages simply because they don’t understand what they are doing. And why should they? Not everyone is an insurance expert.  

Here are two examples of how poor decisions can be made in the purchase of insurance coverage:

Example One:  

Mr. and Mrs. Smith own a 2001 Toyota automobile with 85,000 miles on it. They owe nothing to the bank, so the title is “free and clear.” Mr. and Mrs. Smith aren’t poor, by any means, but they do live on a limited budget.  

Mr. and Mrs. Smith spend $1,000 a year buying collision and comprehensive coverage on their car. In other words, if one of them wrecks the car, and it is his or her fault, or if the car is damaged by hail, ruined in a flood, or if a tree falls on it, their insurance company will pay them for the value of that vehicle. But what is a 17 year old Toyota with 85,000 miles on it worth?

Maybe $5,000 on a good day? So the Smiths are paying $1,000 a year to insure a $5,000 car.   If they had purchased that car in, say, 2012, the amount they would have paid for insurance would be more than the present value of the car. Meanwhile, because the cost of insuring the car is driving up the Smiths’ insurance premiums, they purchased minimum mandatory limits of uninsured motorist coverage ($25,000 per person for bodily injury, $50,000 per accident bodily injury) and they declined to purchase any underinsured motorist coverage whatsoever.  

This means that if they are in a wreck caused by someone else who either has no liability insurance or very limited liability coverage, they only have $25,000 to cover ALL of their personal injury damages, including:

• Past, present and future medical expenses
• Lost wages
• Pain and suffering
• Loss of enjoyment of life
• Permanent impairment

Had they made the decision to purchase more uninsured and underinsured motorist coverage instead of insuring a $5,000 car, they could probably have purchased at least $500,000 of uninsured and underinsured motorist coverage instead. What makes more sense?  Insuring lives for $500,000, or insuring a $5,000 car for about the same price? The answer is obvious.

Example Two:  

Mr. and Mrs. Smith have an excellent health insurance policy with low deductibles and copayments. But despite that, they decided to buy $50,000 per person of optional medical payments coverage under their automobile insurance policy.

Instead of using that money to buy more uninsured and underinsured motorist coverage to compensate them for other damages such as past, present and future lost wages, pain and suffering, loss of enjoyment of life and permanent impairment, they now have health insurance and medical payments coverage under their automobile policy which represents duplicate coverage.

In other words, they have paid for the same coverage twice. Again, if a policyholder can afford to buy both medical payments coverage as well as adequate uninsured and underinsured coverage, that’s fine. But if premium dollars are limited, it would be nice to know where those premiums would get the biggest bang for the buck.

There are many more examples where good choices in the purchase of automobile insurance can be of great benefit to a policyholder and his or her family, and bad choices can be disastrous.  

At Stealey Law & Mediation, we have unfortunately seen many, many cases over the years where individuals and families have suffered because they were inadequately insured and where better decision making in the purchase of insurance would have made all the difference in the amount of compensation we could have obtained for them. It’s so sad for these people and their families when this happens, if it could have been avoided.

WHAT SHOULD YOU DO TODAY IF YOU HAVE QUESTIONS ABOUT YOUR CAR INSURANCE COVERAGES?

If you are insured by a local agent with whom you have developed a relationship of trust over the years, then by all means talk to your agent if reading this short insurance summary has caused you to wonder if you have the right coverages and if you have allocated your premium dollars in the best way possible to protect you and your family and passengers in your vehicles.

If you have an old car, ask your agent if collision and comprehensive coverages are really worth it. Ask if deductibles could be increased to save a bit more in premiums. And, then ask about using that additional money to buy more uninsured and underinsured coverage. Your agent and his/her staff will be more than happy to help you.

STEALEY LAW AND MEDIATION

If you are insured by one of those online or discount companies and you don’t fully understand the coverages that you have or what exactly you are paying for, call Stealey Law & Mediation.  Make an appointment with Jim, bring in your latest insurance declarations page detailing all of your coverages, and Jim will spend 15 minutes with you or whatever it takes to review your coverages with you and make suggestions.  

If you’ve already been involved in an accident and have questions about your coverages, again, call Jim for an appointment. All first consultations are free. Please remember, there are occasions where insurance companies are required by law to offer certain coverages and give the policyholder a knowing and intelligent opportunity to select or reject those coverages. After you’ve been in a wreck that wasn’t your fault, just because an insurance company tells you, for example, that you do not have any underinsured coverage under your own policy (coverage that pays for personal and property damages when the other, at-fault driver has some insurance, but not enough to cover all of your damages) don’t accept that as gospel.  

Whether you may have coverage by operation of law that you don’t even know you have is a matter to be examined by a trained lawyer. Jim Stealey of Stealey Law & Mediation has over 37 years of experience in reviewing insurance policies and coverages and making sure his clients are not given incorrect information about insurance coverage after a wreck. Contact Stealey Law & Mediation today if you find yourself in that situation.

Again, first consultations are always free of charge.