Cars Insurance

Do you have enough car insurance?

car insurance
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Imagine getting ready to leave your house, you open the door and the rain pours down. Now you’re frantically searching for your umbrella… ah, here it comes! You go outside, open your umbrella, and you are now protected from the downpour. If it’s a sunny day and no rain in sight, you probably won’t even care where your umbrella is, or whether you have one! The same goes for insurance. Do you really care about it until you need it? Unfortunately, too many people realize that only in the event of an unexpected event their insurance coverage is insufficient and they have to file a claim with their insurance company.

So, the logical starting point to determine if you have proper insurance coverage is to know the basics. To ensure that you do have proper insurance, you first need to have a solid understanding of the basics of auto, home, personal umbrella and life insurance. In this article, we will focus on auto insurance.

Auto insurance basically covers liability and property damage related to your motor vehicle. There are other optional coverages, but for our discussion, let’s keep focusing on the basics, which are the most important anyway. The first and/or second page of your car insurance policy is the declaration page of your car insurance policy. The declaration page describes your automatic coverage limits in dollar values.

Here’s an example of what you might see on the claims page of an auto insurance policy:

– Bodily Injury/Property (BIPD) 250/500/100

– limited or unlimited

– Medical (Medium) $5,000

– Personal Injury Protection (PIP) 250 w/250 Ded

– Uninsured/Uninsured (UM/UIM) 250/500/100

-Collision $500 (Col) deductible

-Comprehensive (Comp) $500 deductible

-Rental Insurance (RI) 80%/1500

Let’s look at these coverage definitions and amounts in more detail.

BIPD stands for Personal Injury (BI) / Property Damage (PD). Basically, in the example above, the liability protection for this individual policyholder is $250,000 per person or up to $500,000 per accident, plus $100,000 in property damage to the opposing vehicle in the collision. Liability insurance is protection against what is deemed and proven negligence by you in a car accident, so you are legally liable for compensatory and/or punitive damages to another party or parties as a result. BIPD’s BI will cover your negligence resulting in bodily harm to another party or parties. BI also covers attorneys’ fees associated with any lawsuit another party brings against you. In the example above, the person has $250,000 in coverage, covering all-inclusive liability and attorney fees for each injured individual, or $500,000 for the entire incident.

The BIPD’s PD is responsible for damage to the opposing vehicle due to your negligence; therefore, in the above example, property damage to the opposing vehicle or property can be up to $100,000. Now, recognizing the litigious society we live in, we ask if $250,000 per person or $500,000 per incident is enough BI coverage? This is everyone’s personal decision, based on their current assets and net worth, and their knowledge of recent jury decisions and BI case verdicts. A major factor influencing this decision is that if a jury awards compensatory and punitive damages greater than your BI coverage amount, you will self-insure any amount in excess of your BI coverage amount. So, in this example, if a jury awarded $750,000 to an individual who suffered bodily harm when the person driving another car collided with them due to your negligence, then you would have over $250,000 in self-insurance, in This case will be $500,000. If you don’t have $500,000 to settle the award, the judge has many other options to secure compensation to the injured party, such as: garnishing your wages, selling some of your assets, placing a lien on your property, etc. Now you can get a master policy that gives you up to a certain amount over and above your base auto BI coverage. We will examine how the umbrella policy works in more detail in an upcoming article.

Next, we have coverage of “Limited Right to Sue” vs “Unlimited Right to Sue”. Basically, under the “limited” right to sue option, you agree not to sue the person responsible for the car accident for your pain and suffering unless you suffer one of the following permanent injuries:

– Loss of body parts

– Severe disfigurement or scarring

– Displaced fractures

– loss of a fetus

– permanent damage


Please note that selecting this option does not waive your right to sue for financial losses such as medical expenses and lost wages.

Under the “unlimited” right to sue option, you reserve the right to sue the person who caused the crash for any pain and suffering suffered by you. Most people will choose the “limited” option because it costs much less and it provides the ability to sue a negligent party for most major and permanent injuries. However, many attorneys often opt for the “unlimited option” for their personal insurance and pay a lot of extra because they want the right to sue for any injuries.

PIP coverage represents personal injury protection coverage. PIP is paid for by your own policy. PIP covers medical expenses, as well as possible compensation for lost wages and other damages. PIP is sometimes referred to as “no-fault” insurance because the regulations that enact it are often referred to as no-fault laws. PIP is designed to be paid without regard to “fault” or, more properly, legal liability. PIP is also known as “no fault” because, by definition, the claimant’s or the insured’s premiums should not be increased as a result of a PIP claim. If the other party is determined to be at fault in the accident, your insurance can file a PIP claim with the other party’s insurance company in subrogation. PIP is mandatory coverage in some states.

Uninsured/Uninsured (UM/UIM) is coverage in your policy that may pay for injury to you and your passengers, as well as possible damage to your property, if another driver Accidents are legally liable and determined to be “uninsured” or “underinsured.”

An uninsured driver is someone who doesn’t have auto insurance, or has insurance that doesn’t meet the minimum liability requirements set by the state, or whose insurance company has denied their claim or is financially incapable of paying it. A hit-and-run driver is also considered an uninsured driver in most states because it involves paying for injury to you or your passengers.

An underinsured driver is someone who has insurance that meets the minimum legal requirements but does not have a high enough coverage limit to cover damages from an accident. In these cases, UIM insurance can cover your losses. It is important to note that uninsured and underinsured are separate insurances, although in many states they can or must be purchased together. Some states mandate the purchase of UM/UIM, but many do not.

Collision insurance provides coverage for damage to your vehicle. Whether it’s a collision between your car and another car, or a collision between your car and a stone wall. If your car suffers damage due to a collision with something or something, whether or not you are at fault, you are covered. Your deductible usually applies. If you collide with another vehicle and the other vehicle is at fault, your insurance company can subrogate a claim to the at-fault party’s insurance company to recover the claim amount.

Comprehensive (Comp) basically covers what collision coverage doesn’t. When your car suffers damage that is not caused by a collision with another motor vehicle or object, the comprehensive part of your insurance policy will pay for damages. If you do not have comprehensive insurance, then you must pay for vehicle damage not related to the collision at your own expense. Here are the hazards that comprehensive auto insurance typically covers: fire, theft, vandalism, broken or damaged glass, damage from animals, falling objects, storms (hail, wind, etc.), and water. Your deductible usually applies.

Rental Insurance (RI) is insurance for renting a car while your vehicle is being repaired due to a covered accident. In the claim page value example above, 80%/1500 means you have $80 per day of insurance and a maximum total rental cost of $1,500 while your vehicle is being serviced. This is optional coverage that many people take, but some don’t.

Yes, it is like that! Here are the basics of knowing your auto insurance coverage. Not that bad, right? Now that you understand the basics of auto insurance, you can review and analyze the coverage information on the declaration page of your personal auto insurance policy, taking into account your personal financial situation to determine if you have adequate coverage.

Stay tuned for future articles that will explain the basics of understanding homeowners, personal umbrellas, and life insurance. You never know when it will rain!

Joseph Rubino, agent

New Jersey Licensing Property and Casualty, Health and Life

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