An important variable in determining whether my clients will receive full value on their injury claim is their selection of insurance coverage and certain contract clauses buried in their insurance policy. Often a personal injury client believes they have “full” or “comprehensive” coverage; only to discover, at the most important time, they have not purchased sufficient coverage and/or there are clauses within the policy that dilute their recovery.
In this post, I will discuss the finer art of purchasing insurance. This guide should not be considered legal advice, and you should consult an attorney if you have questions specific to your situation. However, with a few simple tips and suggestions, I hope to help resolve avoidable issues and concerns.
Why should you buy insurance? Simple Answer: To Protect Yourself
The most common answer I hear from clients to this question is: “Because I have to.” You buy insurance to protect yourself. To protect yourself you need to consider both the liability and underinsured motorists aspects of an insurance policy. For liability, you need a rough estimate of the value of your personal assets and an assessment of how much you can afford to lose should you cause an injury to someone else. For underinsured motorists, consider whether you are sufficiently protected in the event someone else, with insufficient or no insurance or assets, injures you.
Selection of Coverage and Amounts
Liability Coverage. This coverage protects your financial assets in the unfortunate event you cause injury to someone. Are you wealthy? Do you like taking risks? Are you a poker player that always goes all in? Or do you prefer to play it safe and sensible? Are you an aggressive driver? Are you only an occasional driver? Your assets, personal perception of risk and driving style should influence how much liability insurance coverage you purchase. Most insurance agents do a good job of selecting the right dollar amount of coverage for their clients. You should work closely with your agent to make sure the amount of insurance and the cost of that insurance reflects your personal needs.
Underinsured motorist coverage. This coverage protects you and your family in the event someone else causes an injury to you or your family. Too often this coverage is either declined or minimized as this coverage is not required to lawfully operate a motor vehicle on a public way. Too often, other drivers do not carry enough or any insurance; protect yourself! As a general rule, you should purchase the same amount of underinsured coverage as liability coverage.
Read the Fine Print
Insurance policies are not like the waivers you quickly sign at the gym. You actually need to take the time to carefully read them. There are plenty of fine print details the greatly impact whether and how you receive the benefits of the insurance contract. It is imperative that you understand your policy because, while you cannot negotiate the terms of your policy, you can make sure you find the best one for you. If you do not understand a term or clause in your contract, ask your insurance agent or company to explain it.
Here are two examples of fine print clauses that greatly impact benefits:
- Hit and run “phantom vehicle.” In the event you are involved in an incident where the other drive leaves the scene, all policies require the insured both to report the incident to the police and to the insurance company. Very often the requirement is to have done both within 24 hours. The failure to report provides the insurance company with an excuse to decline coverage.
- Arbitration versus “Sue us.” In the event you end up in a dispute with your insurance company regarding coverage or the value of your benefits, does your insurance agree to arbitrate the dispute or require you to sue them in a court of law? Arbitration is a cost effective method to resolve disputes. On the other hand, a lawsuit is very expensive and time consuming. Presently, most insurance companies require their policyholder to sue them. Why? Because the insurance companies hold a significant advantage in the courthouse. If at all possible, always select an insurance policy that provides for arbitration as a means to resolve a dispute. However, you need to read the fine print closely, many policies state that the parties agree to arbitration only if BOTH sides agree. How often does the insurance company agree? Never.
Practical Planning, Sensible Solutions
Again, this is just a brief overview. If you have any questions about a particular policy you are considering purchasing, then it is a good idea to consult an attorney. I am more than happy to chat with people regarding their insurance policy clauses and answer any particular questions.
John Vaughey has been practicing law for 25 years. John was an attorney for insurance companies for 15 years before entering private practice. You can contact him at (206) 624-6271 or via email at firstname.lastname@example.org.