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When most people purchase insurance for your auto or residence, they typically only have a couple of protections in mind. First, they want to cover the auto or residence (and contents) in case of a mishap so that they can repair or replace them. Second, they are concerned about liability to others. This article is intended to inform you about some other coverages that most people don’t think much about, and to encourage you to explore them with your agent.
1. Medical Payments.
The first and least well-known coverage is the medical payments coverage. It wasn’t until I became an attorney involved in personal injury cases that I was aware that this coverage even existed. I certainly couldn’t ever remember talking about it with my agent. As an attorney, however, I saw the importance of having higher coverage limits under this provision. I recommend that everyone have at least $25,000 in coverage. Increasing to this amount usually results in a very small increase in annual premium.
Just about every auto, homeowners, and business policy will have a section devoted to medical payments coverage. Regardless of who caused the accident, it will pay the reasonable and necessary medical expenses incurred by someone injured in your car (for auto policies) or on your premises (for homeowners’ and commercial general liability policies). It usually has a time limit (one year or two years after the injury).
Why is this important? First, because whose fault caused the injury is irrelevant, the insurer is extremely quick to pay. Second, I’ve seen situations where not having sufficient medical payments coverage has led to a lawsuit that would not have otherwise happened. For instance, suppose you cause an accident and your passenger, who is a good friend, is injured, but doesn’t have health insurance or any other means to pay medical bills. If they get transported to the hospital and undergo surgery to set a broken arm, they will have thousands in medical expenses and no way to pay. If medical payments coverage is available (and set high enough) there typically is no problem. However, if there isn’t sufficient coverage, I have seen friends sue friends in court to get payment out of the liability coverage. Because it is a friend who was driving, they usually wouldn’t have sued. But because they were in collections from the hospital and doctor, they had no choice.
2. Uninsured/Underinsured (UM/UIM).
This is another coverage that is relatively inexpensive and too often underutilized. This coverage applies to automobile policies only, and provides for the payment for your damages when you are injured by a negligent driver who either doesn’t have liability insurance (and “uninsured motorist”) or doesn’t have enough liability insurance (an “underinsured motorist”). We see two common scenarios play out in this area. First, many of my clients have become victims of a fairly common practice in Indiana. Drivers will purchase a vehicle, get a minimum limit insurance policy just long enough to license their vehicle, and then cancel the insurance to get their unused premium refunded. These drivers now have no insurance and are posing a risk to others while on the road. Your uninsured motorist covers you if such a driver causes you injury.
I don’t remember the exact year, but somewhere around the time I began driving (35 years ago), the Indiana minimum liability limits to operate a motor vehicle increased to $25,000. That limit has remained unchanged for decades. Because this coverage is for bodily injury (medical expense, pain and suffering, future costs of care, etc.), and because the costs of medical care rise annually at a rate much greater than inflation, $25,000 won’t get you near the medical treatment it could get you when the law was first changed. Today, a single helicopter ride just to get to where you are going to be treated often costs more than the coverage provided. That’s where UM/UIM coverage comes in. For a relatively small increase in annual premium, you can make sure that any deficiency in limits of a negligent driver is increased to the same limits you carry in liability coverage. I recommend that no one have anything less than $100,000 per person and $300,000 per accident in liability coverage, and that you maximize the amount of UM/UIM that allows you to carry. Then, when someone with no insurance or with low limits causes injury to you or those in your vehicle, the difference between your UM/UIM limit and their limit is available to cover it.
This is a catch-all coverage. For relatively little additional premium, someone with typical coverages (such as $300,000 auto liability limits and a $100,000 replacement cost homeowner’s policy) can get $1 million umbrella coverage, or more. This operates as an excess policy and may fill in some gaps in coverage that may exist. An exhaustive examination of its benefits isn’t possible in this limited space, but it is well worth exploring with your insurance agent. It is fairly inexpensive because it is unlikely to be needed. But if it is needed, it is because something catastrophic has happened. In those rare instances, those who have it are thankful they took the time and paid the extra premium.