Automobile insurance is one of those grown-up topics that isn’t that much fun to think about. We all know we should have insurance (it is the law!), we all want to pay reasonable rates, and we all see a lot of insurance company commercials promising stellar service or cheaper prices. While getting good service at a decent price is important, it is crucial to review your automobile insurance coverage to make sure you and your family are adequately protected. As an attorney who helps people who have been hurt in accidents, I have had many clients tell me that they had “full coverage” but then later find out that my client didn’t understand what coverage she had been paying for and there were not adequate limits to provide proper compensation for her injuries.
There are no magic guidelines to tell you how much insurance you need. Many people are trying to find the lowest premium. However, paying for the least amount of insurance possible may end up causing your family greater harm if you’re in an accident. Before hitting the road for a spring break trip this year, I recommend that you review your insurance coverage to make sure you have enough protection.
An automobile insurance policy in full may look like a small book! These documents are complex and difficult to read straight through. Even though reviewing and interpreting automobile insurance policies is a regular part of my job, I have never sat down to read my entire automobile insurance policy.
In reviewing your insurance coverage before going on a family trip, I have the following recommendations and general definitions to help you out.
- Declarations Page
Each policy should have a declarations page or dec sheet. This is an introductory page which will list the vehicles that are covered by the policy, the types of coverage provided and the amounts of coverage in each category. Some declaration pages will also list the premium, or what you paid, for each item on the declarations page.Review this page first to verify that all of your vehicles are covered. If you have purchased a new vehicle recently, make sure that your insurance policy has been updated to include it.On the declarations page, amounts of insurance coverage are often listed as two levels. For example, a declarations page may say that the bodily injury liability coverage is 100/300. That typically means $100,000 in coverage per person and $300,000 in coverage per accident. The per accident limit would come into play when more than one person in a car is hurt in an accident.
- Bodily Injury Liability Coverage
Bodily injury or liability coverage protects you from financial harm if you cause an accident and injure someone else. The person who was hurt may be entitled to bring a claim against you and liability coverage may pay that claim up to the limit purchased. If there is a claim that is more than your insurance limits, that excess amount can become a civil judgment against your personal assets.This form of coverage is what most people think about when purchasing insurance – you need insurance so you don’t end up losing your house if someone sues you. This coverage would also typically protect you if you gave permission to someone else to drive your car and that person caused an accident.Your bodily injury liability limit should be high enough to protect all your personal assets. If you own $500,000 worth of assets but you only purchase $100,000 in liability coverage, your personal assets may be at risk if you severely injured someone in an accident. Also, if an accident happened, you want to provide enough insurance so that the person that got hurt could get back on his feet.
- Medical Payments Coverage
Medical payments coverage, sometimes called medpay, is essentially a back-up health insurance plan that can pay for medical bills if you are injured in an accident. Most automobile insurance policies have modest medical payments coverage – somewhere around $1,000 to $5,000. It is often possible to purchase a higher amount of medical payments coverage for a small increase in your premium. Particularly if you have a high deductible for your health insurance or you do not have health insurance, you may want to consider increasing your medical payments coverage. Even routine medical care can be very expensive. I have represented many injured people who were charged $5,000 or more for a visit to the emergency room after an accident. A client of mine recently had surgery for her broken arm and the charges were over $30,000!
- Uninsured Motorist Coverage
In Wisconsin, every policy of automobile insurance must include minimum coverage limits of $25,000 per person and $50,000 per accident. Uninsured motorist coverage provides compensation for you if another driver causes an accident and that other driver does not have insurance. Wisconsin law currently states that all drivers are required to have automobile insurance but if a person fails to have insurance coverage the penalty is a fine. The best way to protect yourself and your family is to have sufficient uninsured motorist coverage. I think this form of coverage is even more important than liability coverage; you can control your own ability to drive in a safe manner, but you cannot control the other drivers on the road.
- Underinsured Motorist Coverage
Underinsured motorist coverage is similar to uninsured motorist coverage in that it protects you from a driver that causes an accident who does not have enough insurance coverage.Underinsured motorist coverage is not required by law, but if it is purchased, the policy must include minimum limits of $50,000 per person and $100,000 per accident.Most underinsured motorist policies will contain reducing clauses and specific definitions of what is an “underinsured motorist.” This means that the amount of underinsured motorist coverage that you purchase is likely the total amount you can recover from all sources. For example, if a driver who injures you has $50,000 in liability coverage and you have $100,000 in underinsured motorist coverage, you would likely be able to recover up to $100,000 total for your injuries – $50,000 from the other driver and $50,000 from your underinsured motorist coverage. The amount of underinsured motorist coverage you purchase usually is not on top of, or in addition to, any other amounts that would be paid. Having good underinsured motorist coverage is just as important as uninsured motorist coverage. You can control your behavior on the road, but you cannot control the other drivers or whether the other drivers purchase insurance.
- Umbrella Policy
It is possible purchase an excess policy or umbrella policy. An umbrella policy typically provides for $1,000,000 in excess liability coverage. Many umbrella policies only apply to liability coverage and do not provide uninsured or underinsured motorist coverage unless you specifically ask for that.
Our office recently resolved a case where there was a dispute as to which driver crossed the centerline. Both drivers suffered severe injuries. Our client had insurance; the other driver did not. Our client had $250,000 in liability coverage, $100,000 in uninsured motorist coverage and a $1,000,000 liability umbrella policy. If the jury concluded that the other driver hit our client and crossed the centerline, our client would recover his $100,000 uninsured motorist coverage. If the jury concluded that our client crossed the centerline and caused the accident, the other driver could collect up to $1,250,000. It seems unfair that the same policy would lead to such different results for two people.
Our client was responsible and purchased what he believed was very good automobile insurance, but he did not have nearly enough uninsured motorist coverage to provide compensation for all of his injuries. While he is grateful to not have his personal assets at risk on the liability side, he also wished he had been able to receive full compensation for his own injuries. If you purchase an umbrella or excess policy you should find out whether that policy provides uninsured or underinsured motorist coverage and adjust the limits accordingly.
There are no hard and fast guidelines to determine how much insurance coverage is enough for you and your family. Everyone hopes that you never need it, and many never will. I hope these explanations help make sure that you understand the coverage you are purchasing and how the different types of coverage interact. If you have any questions regarding your insurance policy, please feel free to contact me. I would be happy to review your policy with you.
Peterson, Berk & Cross, S.C., is an established Wisconsin law firm with offices in Appleton and Green Bay. We combine the legal strength of many exceptional lawyers and have helped hundreds of clients resolve difficult legal matters in personal injury, family law, criminal defense and civil rights.
Amy M. Risseeuw joined Peterson, Berk & Cross, S.C., as an attorney in 2005. A graduate from the University of Wisconsin Law School, Amy practices in the personal injury section. She has tried many cases to verdict in multiple areas of personal injury law, including automobile accidents, dog attacks, premises liability, and medical malpractice. In her free time she enjoys following the Badgers, scrapbooking, trying new recipes, and taking naps.