At Mills & Levine, we deal with insurance companies and the intricacies of insurance policies on a daily basis. From that experience, we know how important expansive, high-limit coverage is to protecting your interests, and how a bare-bones policy can leave you in deep financial distress. What’s worse, some people may not even know how limited and shallow their car insurance policies are. Insurance companies haven’t been much help in this regard, as I’ve recently seen a television commercial from a major insurance company warning the audience that they may have “too much” coverage.

To that end, today I’ll be writing about what a bad car insurance policy looks like, and what a good one looks like. First, let’s go over the basic kinds of coverage found in car insurance policies that apply to personal injuries.

Liability – if you are the cause of a motor vehicle accident, this is the amount your insurance carrier will pay to cover the personal injuries (medical bills, lost wages, etc.) of others in the accident. If this amount is exhausted, the injured party can turn to the defendant’s own assets and their own underinsured motorist coverage (see below).

Underinsured Motorist – if the amount stated as “underinsured motorist coverage” (UIM) in an injured party’s own auto policy is greater than the liability coverage in the at-fault driver’s policy, than that excess amount can be accessed to cover the victim’s damages.

Uninsured Motorist – similar to UIM, uninsured motorist (UM) protects you in case you are injured by an uninsured vehicle or the accident was a hit-and-run and the defendant is never identified.

Medical Payments – med pay is a liability-neutral coverage. If you are injured in a car accident, whether by your own fault or someone else’s, and the car you were injured in has med pay, med pay will cover medical bills caused by the accident.

Now let’s take a look at two examples of automobile insurance policies.

Policy A:

Liability Coverage - $30,000
Uninsured Motorist - $100,000

When I talked before about “bare-bones” coverage, this is what I meant. Notice that there’s no Underinsured Motorist coverage at all – so if you’re hit by a car with a paltry $30,000 in liability (like the one in Policy A), then you might be out of luck once your medical bills exceed that amount. There is $100,000 in the similarly sounding Uninsured Motorist coverage, but remember, that only applies if the other vehicle was completely uninsured or the at-fault party is never identified. Since driving without insurance and leaving the scene of an accident are both crimes, dealing with uninsured motorists is fairly rare when compared to the frequent issue of underinsured motorists – that is, damages exceeding the liability coverage.

From the perspective of an at-fault driver with Policy A, the $30,000 in liability coverage can quickly dry up. Each MRI or CT scan taken by an injured person will cost several thousand dollars, as can a trip to the Emergency Room. Persons in need of extended stays at hospitals can rack $300,000 in bills or more – which doesn’t even account for the wages they may have lost or compensation for pain and suffering. A person found liable for these damages who didn’t want to get “too much coverage” has then placed his assets and life-savings at risk.

Policy B:

Liability Coverage - $300,000
Uninsured Motorist - $500,000
Underinsured Motorist - $500,000
Medical Payments - $10,000

A person with this policy is well prepared for the consequences of a car accident, whether he is at-fault or the victim of someone else’s negligence. If he causes an accident and is found liable for the personal injuries of others, then the damages must exceed $300,000 before he has to worry about paying out-of-pocket. If another driver is at fault, then Policy B’s high UM/UIM coverage ensures that medical bills will get paid, no matter the kind of liability policy held by the other driver. Having $10,000 in med pay also allows for some medical bills to be paid without having to go through often lengthy disputes (or trials) about who was at fault.

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