When I first meet a client who has been injured through no fault of their own, one of my first questions is: “How much insurance do you have?” Most clients answer, “I have full coverage.” However, when we review their declaration page and policy, the clients are surprised to learn that they have minimal insurance coverage on their vehicles. The confusion comes from a misunderstanding of what the terms “full coverage”, liability coverage and “amount of coverage” actually mean. The situation becomes more difficult when we learn that the person that injured the client either doesn’t have insurance or doesn’t have enough insurance. The high cost of new automobiles, automobile repair work, and health care often mean the minimal limit required under the Commonwealth of Virginia laws ($25,000/$50,000/$20,000) is not enough money to cover the clients’ damages and pain and suffering. Although you can never
be certain that a driver who injures you will have insurance or enough insurance, your ability to buy additional uninsured (UM) and underinsured (UIM) motorist coverage gives you control over your own financial security. The amount of UM/UIM coverage you purchase will equal the amount of liability coverage unless you specifically request a lower amount.
UM/UIM coverage protects you in the event you are injured by a driver who does not have insurance, a driver with liability coverage less than your total uninsured motorist coverage, a driver whose liability limits are not enough to cover your losses or a John Doe (hit-and-run unknown driver). If you can afford more than the minimum required limits, you should buy more insurance to protect yourself against others you may injure or those that may injure you.
Liability Only Car Insurance
Within the auto insurance field, the terms “full coverage”, liability coverage and “amount of coverage” mean different things and there are many levels between “full coverage” and “liability only.” Automobile insurance can best understood by first fully comprehending the differences between “full coverage” and liability only coverage. Liability coverage is insurance that covers damage you cause to other people and their property. As suggested above, it may be wise to carry coverage in excess of the minimum limits. When referring to liability limits, the insurance industry uses an abbreviation that can be confusing. The required minimum limits are designed as $25,000 / $50,000 / $20,000 or 25/50/20; these designations refer to the maximum amount that an insurance company will pay out under the three basic liability coverages. Some policies have a single limit of liability where some insurance companies sell a policy that covers bodily injury liability per person, bodily injury liability per accident, and property damage liability but does not have separate limits. The single limit must be at least $70,000 to satisfy the financial responsibility laws although limits up to $1,000,000 can be purchased. This limit of liability applies to all bodily injury and property damage liability losses that occur as a result of any one accident for which the insured is legally liable.
The term “full coverage” can be misleading because there are a number of optional coverages – in addition to liability coverage – that you can buy. Generally “full coverage” includes collision coverage and comprehensive coverage. Collision coverage is an optional add-on to comprehensive – although it isn’t optional if you still owe money on your car because the finance company or bank usually requires this coverage. Collision coverage can be a required part of your car insurance coverage if your vehicle is financed or leased. Finance companies require borrowers to carry full car insurance coverage on their vehicles- collision and comprehensive – because they want to be assured that if the car is damaged or destroyed, they can recover their money back. Comprehensive insurance coverage help pays for damage to your vehicle not covered by collision.
Examples include damage or loss due to theft, vandalism, falling objects, fire, storms, flood, and certain other natural disasters. Collision coverage helps pay for damage to your vehicle if you hit another vehicle, another vehicle hits you, or your vehicle rolls over. The insurance companies confuse the issue by including accidents with animals as part of comprehensive coverage, rather than collision.
How Much Money Should You Spend?
So having “full coverage” may not be the same as having an amount of coverage which covers your potential risk. The amount of coverage you need is correlated to the amount of assets you have and the amount of money that you can afford to pay for coverage. But higher limits of coverage also protect you in case the driver who injures you does not have sufficient coverage to compensate you for your injuries and losses, because you can use your underinsured coverage when that happens. The key is to decide how much you can pay in the event of an accident without causing financial hardship. If you do not have insurance, anything of value that you own including your home, savings, future wages, and other assets, may be taken to pay for those losses. Liability insurance will protect you so this does not happen. Liability insurance pays for a lawyer to defend you against any claim or lawsuit.
You should purchase auto insurance in case you cause an automobile accident and you may be responsible for the losses of other people involved. A claim may be made or a lawsuit filed against you for those losses. You may have to pay not only for the property damage you cause, but also for the medical expenses, lost wages, pain, and suffering, and other losses you cause to someone else. The amount of money you may have to be pay could be substantial. You should also purchase auto insurance to cover your injuries or damages to your vehicle. These optional coverages will pay you for your losses whether or not you caused the accident.
For a comprehensive guide on how to purchase insurance, and what to do if you’re involved in an accident, download our free All About Insurance eBook, featuring hand-selected expert articles written by Allen & Allen attorneys.