I have full coverage insurance, don't I?

I have full coverage. Don't I? If you don't have UM/UIM you are not fully covered.

Previously posted by David F Sampson

When I meet a new client who has been involved in an auto accident I always ask them what kind of auto insurance they carry. The overwhelming answer is either "liability" or "full coverage". I think the phrases come from insurance agents who, when they give someone a quote for auto insurance, will often ask their customer, "do you want "liabillity" or "full coverage". Unfortunately your insurance agent will rarely explain what "liability" or "full coverage" mean. Even more unfortunate is that when most people purchase "full coverage" they do not get coverage that fully covers them. In fact "full coverage" quite often does not even come close to fully protecting you and the ones you love.

Let me start with liability coverage. Liability coverage is usually used to describe insurance coverage that will pay for damages you cause if you make a mistake and someone else is hurt or their car is damaged because of your mistake. For example: you are driving down the road and you are momentarily distracted by a child in the back seat. While you are distracted the car in front of you stops suddenly because a dog has run into the road. Because you are distracted you cannot stop your car in time and you plow into the car that stopped for the dog. Your liability coverage will pay to fix the other car. It will also pay the other person's lost wages, medical expenses, pain and suffering, and other such damages caused by you.

Liabillity coverage is one of the most expensive kinds of insurance out there. Liability coverage is what most states require all drivers to carry by law. You can expect liability coverage to cost several hundred dollars per quarter.

"Full coverage" is generally used to describe coverage that will pay to fix your car whether you cause the accident or someone else causes the accident. The phrases "comprehensive coverage" or "collission coverage" are also used to describe "full coverage". Make no mistake about it, even though your agent may call it "full coverage" it does not cover you fully. In fact all it usually covers is your car. An example would be if someone hits your car (because they were distracted and your stopped suddenly because a dog ran out in the road) you can bring a claim against their insurance company to fix your car under their liability coverage. But if their insurance company delays paying your claim (which happens more often then you would think), or if the person who hits you does not have insurance (which also happens more often than you think), you can make a claim on your own insurance to fix your car now.

What is usually called "full coverage" will not pay your lost wages, medical expenses, pain and suffering, or any damages you suffer (other than car damage) as a result of damages caused by someone else. So the only thing fully covered if your car.

In order to make sure you and the ones you love are fully protected you need to know about two additional forms of coverage that, compared to liability coverage, are dirt cheap, and are the types of coverage that will protect you and your loved ones. When you purchase insurance you absolutely have to ask your insurance agent about these forms of coverage and what they cost. They are called "med-pay" and "uninsured/underinsured motorist coverage" (which if often called UM/UIM).

Med-Pay: Med-pay coverage pays for your medical expenses no matter who caused the accident. So whether you make a mistake or someone else makes a mistake, and you are injured, med-pay will pay for your medical bills up the the amount of med-pay coverage you have purchased. Most people buy $1,000.00 - $5,000.00 in med-pay coverage, which means their insurance will pay for $1,000.00 - $5,000.00 of their medical expenses if they are in an accident no matter who is at fault for the accident. Med-pay is nice to have and if a great benefit for those who purchase it, but it is more of a luxury than a necessity.

Uninsured/Underinsured Motorist Coverage (UM/UIM Coverage): UM/UIM coverage pays your medical bills, lost wages, pain and suffering, and other such damages when someone else causes an accident. Uninsured Motorist coverage (UM) applies when the person who causes the accident does not have insurance (they are uninsured). If that happens your uninsured motorist coverage will pay for your damages up to the amount you have purchased. It pays for what the uninsured motorist's liability insurance would have paid if they had insurance.

Underinsured Motorist Coverage (UIM) applies if you are injured by someone else in an accident and their insurance is not enough to cover the value of your claim. An example will illustrate: some other driver causes an auto accident and you lose an arm. The person who caused the accident only has $15,000.00 in liabillity coverage, so you are only able to recover $15,000.00 from their insurance company even though you lost an arm. The person who hit you does not have enough insurance to pay the full value of your claim for your lost arm (they are underinsured). If you have UIM coverage then your insurance will pay you additional money for your losses up to the full value of your claim, or up to the amount of UIM coverage you purchased. So in the prior example if you have $100,000.00 in UIM coverage you can collect $15,000.00 from the insurace company of the person who caused the accident, and you can collect $100,000.00 from your insurance company under your UIM coverage.

UM/UIM coverage is much cheaper than liability coverage. It generally costs less than $50.00 (and often less then $20.00) per quarter.

Now answer this question: what do you think is more likely to happen - you make a mistake while driving and hurt someone else, or someone else out there makes a mistake and hurts you? Most people I talk to believe that some other nut on the road is more likely to cause an accident and hurt them, and that it is much less likely that they will make a mistake on the road and hurt somone else out there. This is why you must have UM/UIM coverage. You are required by law to pay several hundred dollars to make sure the rest of the world is protected against a mistake you may make. It only makes sense to pay an additional $20.00 - $50.00 for the same time period to make sure you and your loved ones are protected from a mistake that someone out there in the world may make (which is much more likely going to be the case).

UM/UIM is an absolute necessity and is a great deal. In fact it is such a great deal that for a while insurance companies were not telling their customers about it. It got so bad that states like Nevada have passed laws that require an insurance company to offer UM/UIM insurance to their customers whenever they sell an auto insurance policy.

A few examples will demonstrate what all this means in the real world.

The scenario is: An auto accident occurs that is not your fault. The person who hits you has $15,000.00 in liabillity coverage, and your injuries are such that your claim is worth $50,000.00.

If you have $5,000.00 in med pay and $30,000.00 in UM/UIM coverage you can collect $15,000.00 from the at fault driver, have your $5,000.00 in med pay coverage pay $5,000.00 of your medical bills, and collect your $30,000.00 in UM/UIM coverage because you were hit by an underinsured driver. In total you collect the full $50,000.00.

If you have $30,000.00 in UM/UIM you can collect the $15,000.00 from the at fault party, and collect your $30,000.00 in UM/UIM coverage because you were hit by an underinsured driver. In total you collect $45,000.00 on your $50,000.00 claim.

If you do not have any UM/UIM you can only collect $15,000.00 from the at fault driver. In total you collect $15,000.00 on your $50,000.00 claim.

One of the worst parts of my job is when someone comes into my office and tells me they have been injured in an accident (or one of their children have been injured), that the person who hit them did not have insurance, and they do not have UM/UIM. There is very little, if anything, that can be done for someone in that situation. Do not let that happen to you. Please talk to your insurance agent today about UM/UIM coverage and purchase it if you do not already have it.