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Do You Have Sufficient Auto Insurance Coverage?

Imagine getting ready to leave your house and you open your door and the rain is pouring down. Now you start to frantically look for your umbrella…. ah, there it is! You step outside, open your umbrella, and you are now protected from that pouring rain. If it were a bright sunny day with no rain in sight you probably would not even care about where your umbrella is or if you even had one! The same is true about insurance. Until you need it, do you really care about it? Unfortunately, too many people realize that they have insufficient coverage only when an unexpected incident occurs and they have to place a claim with their insurance company.

So, a logical starting point to determine if you have proper insurance coverage is to understand the basics. To ensure that you do have the proper coverage, you first need to acquire a good understanding of the basics of auto, home, personal umbrella, and life insurance coverage. For this article, we will focus on auto insurance coverage.

Auto Insurance basically covers you for liability and property damage as it relates to your motor vehicle. There are other optional areas of coverage as well, but for our discussion let’s stay focused on the basics, which are the most important anyway. Your auto insurance policy’s first and/or second pages are the declaration pages of your auto insurance policy. The declarations pages describe your auto coverage limits in numeric dollar values.

Here is a sample of what you may see on your auto insurance policy’s declaration pages:

-Bodily Injury/Property (BIPD) 250/500/100
-Limited or Unlimited
-Medical (Med) $5,000
-Personal Injury Protection (PIP) 250 w/250 Ded
-Uninsured/Underinsured (UM/UIM) 250/500/100
-Collision $500 (Coll) Deductible
-Comprehensive (Comp) $500 Deductible
-Rental Insurance (RI) 80%/1500

Let’s take a look at each of these coverage definitions and amounts in more detail.

The BIPD represents Bodily Injury (BI) / Property Damage (PD). Basically, in the example above, this individual policyholder has liability protection for $250,000 per individual or $500,000 maximum per incident, plus $100,000 in property damage to the other party’s vehicle in a collision. Liability coverage is protection for times when you have been deemed and proven negligent in an auto accident and you therefore become legally liable for the resulting compensatory and/or punitive damages to the other party or parties. The BI, of the BIPD, will cover you for negligence on your part that resulted in bodily injury to the other party or parties. BI also covers the cost of attorney fees associated with any litigation brought against you by the other party. In the above example, this person has $250,000 in coverage for all inclusive liability and attorney fees per individual injured or $500,000 for the entire incident.

The PD, of the BIPD, covers the damage to the other party’s vehicle as a result of your negligence; thus, in the above example, up to $100,000 in property damage to the other party’s vehicle or property. Now, being cognizant of the litigious society that we live in, we ask if $250,000 per person or $500,000 per incident is enough BI coverage? This is a personal decision for every individual to make depending upon their current assets and net worth, and their knowledge of recent jury decisions and awards on BI cases. A major factor affecting this decision is an understanding that you are self-insured for any amounts awarded in excess of your BI coverage amount, should the jury award compensatory and punitive damages greater than your BI coverage amount. So, in this example, should the jury award $750,000 to the individual driving the other vehicle who suffered bodily injury because you collided with them as a result of your negligence, then you are self-insured for the amount in excess of $250,000 which in this case would be $500,000. If you do not have the $500,000 to settle the award, then the judge has many other options to ensure restitution to the injured party such as: garnishing your wages, selling off some of your assets, placing a lien on your property, etc. Now, you can get an umbrella policy to cover you up to a certain amount in excess of your underlying auto BI coverage. We will look at how an umbrella policy works in more detail in an upcoming article.

Next, we have “limited right to sue” versus “unlimited right to sue” coverage. Basically, under the “limited” right to sue lawsuit option, you agree not to sue the person who caused the auto accident for your pain and suffering unless you sustain one of the permanent injuries listed below:

-Loss of body part
-Significant disfigurement or scarring
-A displaced fracture
-Loss of a fetus
-Permanent injury
-Death

Please note that choosing this option does not waive your right to sue for economic damages such as medical expenses and lost wages.

Under the “Unlimited” right to sue lawsuit option, you retain the right to sue the person who caused an auto accident for pain and suffering for any injury. Most people will choose the “limited” option because it is far less costly and it provides the ability to sue the negligent party for most major and permanent injuries. However, many attorneys will usually choose the “unlimited option” for their own personal coverage and pay the significant extra cost because they want the right to sue for any injury.

PIP coverage stands for Personal Injury Protection coverage. PIP is paid from your own policy. PIP covers medical expenses, and possibly lost wages and other damages. PIP is sometimes referred to as “no-fault” coverage, because the statutes that enacted it are generally known as no-fault laws. PIP is designed to be paid without regard to “fault,” or more properly, without regard to legal liability. PIP is also called “no-fault” because, by definition, a claimant’s, or insured’s, insurance premium should not increase due to a PIP claim. A PIP claim may be subrogated by your insurance against the other party’s insurance company if the other party was determined to be the neglligent party in the accident. PIP is a mandatory coverage in some states.

Uninsured/Underinsured (UM/UIM) is coverage from your policy that may pay for injuries to you and your passengers, and possibly damage to your property, when as a result of an auto accident the other driver is both legally responsible for the accident and determined to be “uninsured” or “underinsured.”

An uninsured driver is a person who has no auto insurance coverage, or had insurance that did not meet state-mandated minimum liability requirements, or whose insurance company denied their claim or was not financially able to pay it. In most states, a hit-and-run driver is also considered an uninsured driver as it pertains to paying for injuries to you or your passengers.

An underinsured driver is a person who had insurance that met minimum legal requirements, but did not have high enough coverage limits to pay for the damage caused by the accident. In these situations, UIM coverage can pay you for your damages. It is important to note that uninsured and underinsured is separate coverage, although in many states they can or must be purchased together. Some states mandate purchase of UM/UIM, but many do not.

Collision coverage insures you for damage to your vehicle. No matter if it is a collision between your car and another car, or your car and a stone wall. You are covered if your car sustains damage as a result of colliding into something or something colliding into it, whether you are at fault or not. Your deductible will usually apply. If you collide with another vehicle and the other party is at fault, then your insurance company may subrogate the claim against the at fault party’s insurance company to recover the claim amount.

Comprehensive (Comp) basically covers what collision coverage does not. When your car sustains damage that did not result from colliding with another motor vehicle or object, the comprehensive portion of your policy will pay for the damages. If you do not have comprehensive coverage then you would have to pay out of your own pocket for any damage to your vehicle not related to a collision. Here are the perils typically covered by comprehensive auto insurance coverage: fire, theft, vandalism, broken or damaged glass, animal inflicted damage, falling objects, storms (hail, wind, etc.), and water damage. Your deductible will usually apply.

Rental Insurance (RI) is coverage for you to rent a car while your vehicle is being repaired because of a covered incident. In the above example of declaration page values, the 80%/1500 means that you have coverage for $80 per day and $1,500 maximum total cost to rent a car while your vehicle is being repaired. This is an optional coverage that many people take, but some do not.

Well, that is it! That is the basics of understanding your auto insurance coverage. Not so bad, right? Now that you understand the basics of auto insurance coverage you can review and analyze your personal auto insurance policy’s declaration page coverage information while taking into consideration your personal financials to determine whether or not you have sufficient coverage.

Stay tuned for future articles that will explain the basics of understanding homeowner’s, personal umbrella, and life insurance coverage. You never know when it is going to rain!

Joseph Rubino, Agent
NJ Licensed Property & Casualty, Health, and Life

What Affects The Costs Of Health Insurance Premiums?

If you are in the market to purchase a health insurance policy, you may be baffled at the array of prices of similar policies. There are a number of factors that determine the premiums on your health insurance policy. Each health insurance company will have their own actuarial team that determines the prices and classes of risks for each applicant. The applicants risk is a large part in what determines their risk class, but there are other aspects which causes fluctuation in premium prices.

One of the major factors that can raise health insurance premiums is the use of tobacco. Tobacco has been known to cause a number of health ailments that includes cancer. This factor can significantly increase the cost of health insurance. Knowing that cancer and smoking will decrease the average lifespan of a person, insurance premiums will rise. In some cases, health insurers will provide an incentive to help the insured quit smoking and cover smoking cessation products including nicotine gum, the patch, etc.

To qualify for health insurance, the applicant must be in reasonable health as well. This includes a proper height, weight and body mass index. People seeking coverage with a high body mass index, will have elevated premiums compared to those with an average BMI. Some insurance companies will not insure an obese person as it is not considered an insurable risk. Applicants looking to have the lower end of the premiums should be in the best health possible prior to applying for coverage.

An applicants age can have an ample impact on the price of coverage. The majority of younger people have minor issues with health issues. These may include common colds, a flu, ear infections, small accidents, etc. As a person ages, the likelihood of that person going to the doctor, needing critical care or becoming diagnosed with a chronic disease increases. The cost of major health issues becomes riskier for the company to insure. This is a direct result of increasing premiums as the person ages.

Pre-existing conditions for applicants will also raise the premiums on health insurance costs. Pre-existing conditions require more visits to a practitioner and greater risks for the insurance company to cover related claims to the pre-existing condition. Some insurance companies will only cover certain aspects of the pre-existing condition or won’t cover anything at all.

Another factor that may increase an applicant for health insurance premiums would be their gender. Unlike life insurance, women usually pay higher premiums than men for coverage. The reasoning behind this is due to the fact that women go to the doctor more often, need an OB/GYN specialist, take more prescription drugs, have maternity costs and are subjected to certain chronic diseases. The average cost to deliver a baby range anywhere between $10k-$15K of which doesn’t include the prenatal and postnatal medical care.

Other risks that the insurance companies factor in when determining premiums for the applicant are their lifestyle choices. These can range from a number of different topics including their profession, marital status, where they live and more. Insurance companies will take in all factors when determining a reasonable cost for insurance. For obvious reasons, a race car driver will be a much higher risk than an accountant. Insurance companies also are aware that married couples will live longer than single people. Other factors including the area code in which the applicant lives will be represented in the premiums. People that live in the same areas, tend to have similar eating, exercise and living habits.

Insurance premiums can be expensive, but insurance companies must manage risk properly and set a proper premium on applicants. Higher risk applicants will have higher premiums. Some variable that an applicant can control is eliminate tobacco use, exercise regularly and eat right for a healthy body mass index and have a safe occupation. Other factors including pre-existing conditions, family health history, gender, etc. the proposed insured won’t have control over. If an applicant was to choose higher deductibles, then the premiums would decline. However health insurance can be costly, but if the right coverage isn’t in place, a person could be exposed to a substantial risk.

Car Insurance Coverage 101 – What Is Required And What Is Optional?

Are you confused with what coverage you need on your car insurance policy? Most drivers don’t understand basic auto insurance coverage options and which combination makes sense for them. Today insurance companies try to differentiate themselves from the rest of the pack by coming up with fancy names coverage options. This only confuses the customer when they are trying to compare rates from other companies which is probably the plan all along. I will try to better explain which options you have for car insurance and why you might need them.

As an auto insurance consumer you need to understand the two types of coverage available on any standard car insurance policy.

Required Coverage – Most states have a minimum level of coverage that is legal to own and operate a motor vehicle. This usually includes liability insurance for bodily injury, medical payments and property damage.

Optional Coverage – Beyond what is required to meet state law you have many more options to add-on an auto policy. This optional coverage can provide protection for your vehicle, towing services, and much more.

I will first discuss the details of required coverage and then explore many of the most popular optional coverage features available today.

Required coverage is often referred to as “minimum liability limits” or just “liability insurance”. Each state will have their own set of limits that is required by an owner of a motor vehicle. These limits provide protection for all other drivers in the event of an accident. Here is an explanation of the most common required coverage limits:

  • Bodily Injury – Expenses resulting from other people’s injuries or death for which you are legally responsible. Such expenses include loss of income, medical bills and pain & suffering. Most states will have a minimum limit represented in dollars such as $25,000 in bodily injury per person.
  • Property Damage – Coverage for your liability of damaging another person’s personal property after an accident. Such items can include motor vehicle, house, or fence. Again most states will have a minimum limit represented in dollars such as $15,000 in property damage per accident.
  • Medical Payments – Some states have passed laws requiring medical payments coverage or a waiver must be signed to deny it. This coverage pays for medical expenses if you or a passenger in your vehicle are injured. Sometimes coverage will extend to other vehicles you are riding in up to the amount specified on the policy.
  • Personal Injury Protection (PIP) – In no fault states personal injury protection (PIP) is usually required. This coverage allows for a broader range of medical expenses to be covered over standard medical payments coverage. It can cover lost wages and other medical bills that would not be covered by medical payments.
  • Uninsured/Underinsured Motorist Coverage – This covers you and your passengers in an accident where the at-fault party is either under insured or not insured at all. It will also cover accidents where the other party has hit-and-run you in a vehicle or as a pedestrian. While required in most states it can also be waived in most cases. It is not recommended to waive this type of coverage.

Now that you understand what can be required on auto insurance we will shift our focus to optional coverage items. There are too many options to list them all in this article but I will detail a few popular coverages and what they are used for.

  • Comprehensive coverage – True to its name comprehensive coverage encompasses almost everything besides hitting another object. Common claims would include theft, vandalism, wind damage, hail damage and much more. This type of coverage will have an associated deductible that would be due at the time of the claim. If you have a loan on your vehicle this coverage is generally required by your lender.
  • Collision coverage – The name says it all, collision coverage will protect the vehicle against running into something else including another vehicle or object. Usually this is used after an accident where the driver is at fault for the damage done to the vehicle. A deductible is associated with this coverage and can range from $0 up to $1500. If you have a loan on your vehicle this coverage is generally required by your lender.
  • Roadside assistance/Towing – Most insurance companies offer this coverage for a very small premium and it is one of the most used. From a flat tire to a tow to the nearest repair shop this coverage is worth the price. Expect to pay $20 to $50 per year for this coverage depending on the year, make and model of your car.
  • Rental Car Reimbursement – Each company has a different name for this coverage but in the event you need to rent a vehicle while yours is being repaired this is what you will need. It usually only pays for a rental car if the vehicle is in the shop under a covered claim such as an auto accident. Expect to pay between $50 and $150 year for this coverage depending on the daily limit.
  • Uninsured Motorist Property Damage – Most people don’t realize that even if they have uninsured motorist liability coverage that doesn’t mean your vehicle is covered if someone hits-and-runs. This will provide protection for the vehicle in the event you don’t have collision or comprehensive coverage and the vehicle was hit by an uninsured motorist.
  • Glass coverage – Only a few auto insurance providers offer this coverage but it is a very nice coverage to have. It will replace any glass in the vehicle or repair it for a small or no deductible. Expect to pay $25 to $75 per year for this coverage depending on your vehicle type.