Last Sunday Night, I had the chance to talk with a friend, Abraham Abukar at WATB AM 1420 which serves the Somali Community in DeKalb County. We spoke about uninsured motorist coverage (or “UM Coverage”). For close to twenty years, I have represented accident victims injured or killed in auto, trucking and motorcycle accidents. One of the biggest problems I see in my practice is not enough insurance coverage. Most all drivers assume they are fully covered when, in fact, they are not.
WILL SOMEONE ALWAYS PAY?
Most people assume that if an accident is not their fault, someone will pay. Unfortunately, this is not true. If the at fault driver has little or no insurance, then the victim will have to pay the difference.
THE INSURANCE POT
In reality, an injured person is only able to recover from the available insurance covering the loss. In talking with my clients, I refer to this as the “insurance pot.” The amount of insurance coverage in the pot depends on how much coverage the at fault party carries. If the at fault party has little or no insurance, then you must look to your own insurance to cover the difference. If you have little or no insurance, then you may have to pay for your medical bills. This is true even if you did not cause the accident.
WHAT IS FULL COVERAGE?
Most people assume that they are “fully covered” just because they have auto insurance. They believe having “full coverage” means that someone will pay all of their medical bills if an accident is not their fault. Unfortunately, this is incorrect.
YOUR INSURANCE POLICY
Bundle of Sticks
The best way to think of your auto insurance policy is like a bundle of sticks. Each stick represents a coverage part. Some people may have as many as seven coverage parts. Others may have only one or perhaps two coverage parts. Yet, if you ask each person whether he has enough insurance, he or she will probably tell you they are fully covered. Whether you are fully protected from a loss depends upon what coverage parts you have. The standard coverage parts for auto insurance include: Liability, Comprehensive (or “Comp”), Collision, Medical Payments (or “Medpay”) and Uninsured Motorist (or “UM”).
Georgia requires that each individual driving an automobile on the roadways of this state have no less than $25,000.00 in liability coverage. Liability coverage is one coverage part in a typical auto policy. This coverage protects the world from your actions. In the event you cause an accident, liability coverage will pay the injured party. Your insurance company will defend you against the loss. Your insurance company will also indemnify (or pay) for any damages you have caused up to the limits of the policy. In other words, if you cause an accident that injured someone and you have liability policy limits of $25,000.00, then the insurance company will pay the injured party up to $25,000.00 on your behalf.
Comprehensive coverage pays for damage to your car caused by theft or hazard. If your car is stolen, comprehensive coverage will pay for the loss. This coverage will also pay for loss caused by fire, lightening, falling objects, explosion, wind, hail, water, flood or vandalism. Comprehensive coverage does not pay for bodily injuries.
Collision coverage pays for damage to your car caused by an accident or from striking a fixed object. It is considered “first party” coverage because you settle with your own insurance company (rather than a third party). This coverage will pay you to fix your car unless it is totaled. If totaled, this coverage will pay the fair market value of the car. Collision coverage does not pay for bodily injuries.
Medical payments coverage pays for your medical or funeral bills in the event you are injured or killed in an accident.
Uninsured motorist coverage or “UM Coverage” pays for your bodily injuries in the event the at-fault party has little or no insurance.
UM COVERAGE: WHAT SHOULD YOU DO?
I always ask friends and people I meet whether they know how much insurance they carry. Typically, no one readily knows. So, my first suggestion is to find and read your policy.
Locate Your Dec Page and Policy
Look for your declarations page (or “dec page”) and understand what coverage parts you carry. The insurance company sends you a dec page every six months. The dec page lists your coverage parts and insurance limits for each.
Read your Policy
Your insurance policy is separate from your dec page. The insurance company sends you a policy when you first purchase insurance. The policy is the contractual agreement between you and the insurance company, which is why it is important to keep. It is usually the size of a small pamphlet printed on thin paper. From time to time, the insurance company will mail revisions to the policy. These revisions are called “endorsements.” Endorsements amend the terms of the insurance. You should always keep these endorsements for your records since they modify your insurance coverage. These days, most insurance companies will have your policy information online. Once, you locate your dec page and insurance policy, read them. If you don’t understand your coverage, call your insurance agent and ask questions.
How Much Insurance do you Need?
You should buy as much UM Coverage as you can afford. I like to see my clients have no less than $50,000.00 UM “Add On” Coverage. For more affluent clients, I recommend at least $100,000.00 UM “Add On” or more. UM coverage is not expensive. Compared to liability coverage, the cost is a fraction of that for liability. Resist the urge to skimp and save money by rejecting “Add On” coverage.
Georgia now requires that insurance companies provide UM Policies that “add-on” to existing liability coverage unless the insured (that’s you) rejects the “add-on” feature in writing. This is a very important feature. Formerly, UM Coverage “reduced” and was therefore only available if it exceeded available liability coverage. It sounds confusing and the best way to describe the difference is through the following examples:
(1) Add On UM Coverage
At fault driver causes an accident and has $25,000.00 liability coverage. Victim has $25,000.00 UM Coverage under Georgia’s new “add-on” requirement. The total insurance available to cover the victim’s injuries in this example is $50,000.00.
+25,000.00 UM “Add-on”
50,000.00 Total Coverage
(2) Reduced UM Coverage
Assume in this example that victim chooses to save money and opts to reject Georgia’s new “add-on” feature. He signs a written rejection with his insurance company and buys “reduced” coverage. Using the same example from above, at-fault driver causes an accident and has $25,000.00 liability coverage. Victim has $25,000.00 UM “Reduced” coverage. The total insurance available to cover the victim’s injuries is only $25,000.00. Of that total, the available UM Coverage from the victim’s policy is zero. The only available recovery is from the at fault driver’s policy.
–25,000.00 UM “Reduced”
25,000.00 Total Coverage
(3) The Real Cost
Assume from the examples above that victim has fractured his leg requiring surgery to insert rods and screws in his femur. His surgery bills are $30,000.00, Hospital fees are $15,000.00, Radiology bills are $2,500.00, and Ambulance is $2,500.00. Total medical bills are $50,000.00. In Example (1) above, victim’s medical bills would be fully covered because there is $50,000.00 in the insurance pot to cover the loss. In Example (2) victim sought to save money on his insurance and rejected “add-on” coverage for the cheaper “reduced” UM Coverage. Using the same medical bills of $50,000.00, victim would be short $25,000.00. In other words, there would only be $25,000.00 available insurance coverage to pay for victim’s medical bills. Victim would therefore have to pay the remaining $25,000.00 from his pocket.
(4) A Real Life Example
Here is an example from one of my recent cases. Several years ago, I represented a retired lawyer. He was elderly and frail, a widower with one child suffering from Down’s syndrome. My client was rear-ended near Marietta. The accident was not his fault. He died from his injuries. When I began to investigate the available insurance coverage, I discovered a tragedy. The at-fault party only carried enough liability insurance to meet the minimum Georgia requirements of $25,000.00. My client carried $25,000.00 UM “Reduced.” He had no medical payments coverage. So in calculating the available coverage in the pot, my client’s estate had only $25,000.00 in which to collect for his death. The tragedy lies in the coverage my client purchased. He carried liability insurance in the amount of $2 Million Dollars. In essence, he had protected the entire world but not himself. I can only assume as a lawyer he was fearful of being sued and felt the need to carry enormous liability coverage. I suspect he did not understand the importance of UM Coverage.