I have generally kept to more esoteric, positive and moving forward with life subjects on this website, but a big part of getting that mindset is knowing that you are protected in other areas of your life as well. Having worked for a major insurance carrier for a lot of years and now working on the other side of the fence, I think it is important to delve into this area at least once.
Here in California, if you are going to drive a car, you are supposed to have insurance. Nevertheless, approximately 30% of drivers don’t. Sometimes it is a choice between following the law and putting food on the family table. Auto insurance is anything but cheap.
Anyone watching TV would think it easy to be “Fully Covered” as required by California Law. Just call and get a quote over the phone. It’s easy. And you can buy “Full Coverage” for a “low, low price, regardless of your driving record!”
What these brokers, and most insurance carriers don’t tell you, however is that “Full Coverage” in California means only what the law absolutely requires. Minimal limits of personal injury protection, property damage and uninsured motorist coverage. No collision coverage to fix your car in case you hit something, no comprehensive coverage in case your car gets vandalized or stolen, no medical payments coverage to help with your out of pocket medical expenses, no rental reimbursement or any other option that you might want to have.
So what does it mean to have minimal limits? What’s wrong with that if that is what the law requires?
Let’s take the following example to give you a better idea: Let’s say you are driving alone in your own fairly new car, that you are still paying for, on the freeway. All is well and traffic is moving until, as is common in California, traffic comes to a grinding halt. In fact, they stopped so quickly that you barely had time to brake. Still, you were not able to stop and you plow into the rear of that 2016 Lexus in front of you. And if that wasn’t bad enough, the beat up old pick up truck behind you couldn’t stop either and plows into your rear, pushing you into that Lexus for a second time.
The accident is pretty significant and the Lexus, your car and the truck behind you are all totaled. The only one that was drivable was the bug truck that the Lexus got pushed into. To top it off, you, the guy in the Lexus and the guy that hit you were all injured and all of you had to be transported to the hospital by ambulance.
Good thing you were “Fully Covered” by your insurance policy…Or were you?
That policy you bought, even though you were following the law, only carries a maximum of $10,000.00 in property damage liability coverage. Since that Lexus you hit was totaled, and only being two months old it’s worth about $40,000.00. Even if his insurance paid for it with his collision coverage, his insurance company has every intention of getting paid back. Your insurance company can contribute $10,000.00 because that’s what you bought to be “Fully Covered.” The rest may end up coming out of your bank account. And what about his injuries? The Ambulance ride is about $1,300.00, the emergency room bill with x-rays and CT scans is another $3,000.00-$5,000.00 and the time the Lexus driver lost from work and the follow-up treatment could pretty much exceed that $15,000.00 you have in per-person injury coverage.
And what about your car and your injuries? To your dismay, you find out the guy behind you is one of the 30% that does not have insurance. Since the policy you bought does not have collision coverage you will have to eat the tow bill, the storage fees at the tow yard and the rest of the payments you still owe on your car. If you were lucky enough to have Uninsured Motorist property damage coverage you will be able to recover a maximum of $3,500.00 which will probably go to the lien-holder. Your injuries are going to be the same story. If you did not decide to save money by refusing Uninsured Motorist coverage on your policy, your top coverage is $15,000.00. If you have health insurance your bills are covered except for your co-pays but your health insurance company will be looking for reimbursement because your injuries were caused by a third person. That doesn’t leave you much to recoup your own loss of earnings and future co-pays. Worse, now you may be behind on your bills because you can’t work. You could sue the guy behind you but if he doesn’t have anything, good luck getting paid and that doesn’t solve the immediate problem.
So, what is a person supposed to do? Changing your auto coverage after the accident won’t help because what you had at the time of the accident is what applies. If you have not been put in this situation yet (Just about everyone in this state is likely to be in an accident at some point) it is time to be pro-active and make sure you have the coverage you need. What do you have to protect? How much do you think you will need to keep someone you hit from suing you and what do you think you will need if you are laid up for a while because of someone else’s negligence? The difference between $15,000.00 and $100,000.00 in coverage is really small, sometimes as little as $10.00 per month. Is that worth some peace of mind? Think about it.
There is a whole lot about insurance that people don’t generally know. Way too much to go into here. It boggles my mind why brokers and insurance companies don’t explain all of this, leaving people to find out the hard way.