Perform an Auto-Insurance Check-up

Make sure you have the coverage you need before an accident happens

As the new year is fast approaching, a lot of people make new year’s resolutions and start thinking about the year ahead. Here at the Ellis Law Group, PLLC, we’ll be performing our annual car insurance check-up. It’s easy to do, and we recommend everyone performs this review at least once a year.

To get started, ask your insurance agent for two things: (1) a copy of your currently effective insurance declaration policy, and (2) a copy of your currently effective complete automobile insurance policy. Once you have it, you can begin your review.

Once you have these documents, the purpose of the review is to make sure that you have enough coverage that if you are responsible for an accident you have adequate insurance (known as liability coverage), and also enough insurance that if someone hits you or your loved ones while they are traveling and the at fault driver doesn’t have sufficient insurance, you are still covered by your own policy (known as underinsured and uninsured motorist coverage). One of the great secrets of the insurance industry is that you can add substantial amounts of excess coverage over the basic benefit levels often for very little additional money. It is always important to ask how much it would cost to increase your premium amounts if you were to, for example, increased your underinsured and uninsured motorist coverage from $50,000/$100,000 to $100,000/$300,000. Often it is only a few dollars a month, and that can make a big difference if you are ever in an accident. But we are getting ahead of ourselves.

When performing the review, start with the declaration page. Below is a brief and general summary of some of the phrases and insurance coverages you are likely to see when reviewing your declaration page. It is incredibly important when considering these coverages to also obtain the policy, which will show when these coverages apply and what possible exclusions may exist.

  1. The Effective Date/Effective Period: This tells you when you started having insurance under the policy, and, if there is a period, the date it ends. The first part of this process is of course making sure that you have valid insurance. If not, you should get some immediately.
  2. Vehicle Description: This identifies the vehicles that you have that are covered under the policy. Some parts of your insurance coverage apply solely to the vehicle, so making sure that you have the right vehicles identified is important. If you replaced a vehicle or no longer are using a vehicle, let your insurer know.
  3. Uninsured Motorist Coverage: This is coverage that applies when you are in an accident with another driver who is at fault, and they are uninsured. This represents the amount of money you will have to pay medical bills and other compensation to you or members of your household for injuries you sustain in an auto accident. It would be in “excess” to the coverage provided by the at-fault driver. For example, if the at-fault driver has no liability coverage, and you have $100,000 in damages, if you have Underinsured Motorist Coverage of at least $100,000, your own insurance company should pay you the $100,000 of damages that you incurred as a result of the accident.
  4. Underinsured Motorist Coverage: This is coverage that applies when you are in an accident with another drive who is at fault, and the limits of their liability coverage is less than the amount of your damages. It would be in “excess” to the coverage provided by the at-fault driver. For example, if the at-fault driver has $25,000 in liability coverage, and you have $100,000 in damages, if you have Underinsured Motorist Coverage of at least $100,000, your own insurance company should pay you the additional $75,000 of damages that you incurred as a result of the accident. If you only have $50,000 of Underinsured Motorist Coverage, you may only be able to recover a total of $75,000 in damages, and would be unable to recover the remaining $25,000 of damages you have incurred.
  5. Liability Coverage: This is the amount of insurance you have available to pay individuals who are damaged in an accident if you are at fault.
  6. Property Damage Coverage: This is the amount of insurance you have available for property damage to any other vehicles if you are responsible for an accident. For example, if you have $100,000 in total property damage coverage, and you are in an accident where you are at fault that causes two vehicles to be totaled, and they are each worth $50,000, you would have sufficient coverage for the property damage to those vehicles under your policy. If there was a third vehicle involved, and you only had $100,000 in coverage, you may not have adequate insurance under your policy to cover those damages.
  7. Auto Damage – Collision/Other: This is the amount the insurance company will pay if your vehicle is damaged in an auto accident or in certain other situations. The deductible is the amount of money you may have to pay before the insurance company will have to pay any money. For example, if your deductible is $500, and your total damage is $499, the insurance company will not be obligated to pay anything.
  8. Personal Injury Protection: Each state differs in their no-fault insurance coverage requirements. In Kentucky, each person has $10,000 in no-fault insurance coverage for payment of medical expenses, lost wages and certain other replacement service costs regardless of who was at fault in the accident. You can specifically waive this right, but to do so it must be expressly done in writing.
  9. Medical Payments/Additional PIP: Some insurance companies offer you the option of purchasing additional no-fault insurance for medical bills. For example, if you had an accidental collision with a guard rail, telephone poll, or other driver, you may have medical bills totaling $12,000 and lost wages of $3,000. Under PIP, the first $10,000 of those expenses may be covered, but you would still have an additional $5,000 in unpaid expenses. Acquiring additional medical bill coverage could allow you to pay all your medical expenses. This coverage is particularly helpful for people with limited health insurance or high medical insurance deductibles.
  10. Policy Discounts: Most declaration pages will show the discounts you are getting, for example, if you have gone a certain amount of time without an accident, or your car has advanced safety features or anti-theft devices installed. You may also qualify for a discount if you have multiple insurance policies with the same company.

Once you are comfortable with the declaration page, you should familiarize yourself with the rest of the terms and conditions of the policy so that you understand exactly what you are getting. You may be fine with the terms. But by shopping around for some other plans, you may find you get a much better policy without having to spend substantially more money. Some general provisions that you may want to review are below:

  1. Who is covered: Most policies cover both you, and also other people who live in your household, such as your spouse.
  2. Exclusions: Many insurance policies have specific exclusions for when they are obligated to pay liability insurance on your behalf if you are at-fault in an accident. For example, many policies currently exclude from liability coverage any accidents that occur while you are transporting passengers as an uber or lyft driver, or otherwise engaged in business operations. Other common exclusions involve crashes that are intentional, or where the damage was done to either the insured or someone else in their home. Often the policies also exclude what are called “punitive” damages, which are damages that may be assessed if you were engaging in grossly negligent or reckless conduct (among other grounds), for example, if you were driving under the influence of drugs or alcohol.
  3. Duties Following An Accident Or Loss: Many policies contain provisions that set forth your obligation as an insured following an accident. For example, you may be required to notify the insurer promptly following an accident. You must also generally cooperate in connection with the litigation, and also submit to an independent medical examination. You may further be required to provide the insurer with authorizations to obtain your medical records if you are claiming physical or mental injuries, and employment records if you are seeking lost wages or other economic damages.

This Client Education Summary is not legal advice, and should not be viewed as legal advice applicable to any specific issue you may have. If you have a specific issue, contact a lawyer and have them review the details of your specific policy.