Do I Have Enough Auto Insurance?

Do you have enough automobile insurance? Don’t wait to think about this question until after you’re involved in a car accident.

"But I have full coverage!”

When I hear a potential car accident client tell me this, I cringe inside because I know that, about 50 percent of the time, I’m going to find out that their insurance coverage is anything but full.

The typical scenario is this: a potential client comes into our office following a car accident for their free consultation. And as is so often the case, the other driver who caused the accident either doesn’t have any insurance at all, or has the minimum insurance coverage required by Florida law. Either situation is devastating news for someone who has been seriously injured as the result of someone else’s careless driving.

So, just what is "Full Coverage”?

A better question might be "What is the minimum auto insurance that all drivers are required to have?”

Florida law only requires that your automobile policy have the following coverages:

• $10,000 liability coverage for property damage to the other person’s car; and
• $10,000 coverage for what is known as "Personal Injury Protection” or "PIP” (also known as "No-Fault” insurance) to pay for your own medical bills and lost wages (but not those of the other driver if you were at fault). This does not protect you from any claims for personal injury brought by the other driver against you.

Importantly, the law does not require you, or anyone else, to have liability insurance to pay for the other person’s medical bills, lost earnings or disfigurement, pain and suffering and loss of the capacity to enjoy life. That means that if you are injured by the negligence of another driver, the other driver is required to have coverage in the amount of $10,000 to pay for the property damage to your car but is not required by law to have liability insurance to pay for your medical bills, lost earnings or pain, suffering or disability.

The hard truth of the matter is this: if you just have the bare minimum insurance required by Florida law, and are seriously injured in a car accident and the at-fault driver either also has the minimum required insurance or no insurance, you could be out of pocket thousands of dollars to pay for your medical bills and lost wages.

Does this law make sense? We don’t think so, but that’s the law here in Florida.

So, what type of auto coverage should I buy?

I am going to recommend two categories of coverage: (1) "Must-Have” coverages; and (2) "Should-Have” coverages. Ideally, you should get all of the coverages in both categories, but if you’re going to skimp on some coverages, don’t skimp on any of the "Must-Have” coverages.

1. "Must-Have” Coverages: In addition to the two types of coverage discussed above that are mandatory under Florida Law (Property Damage Liability Coverage and Personal Injury Protection (PIP) Coverage, the most important non-mandatory coverages to have are:
• Bodily Injury Liability Coverage ("BI Coverage”). This is liability insurance coverage to protect your assets if you are at fault in an accident and the other person is injured and sues you.
• Recommended Coverage Limits: We suggest that you buy Bodily Injury Liability coverage in the amount of $100,000 per person/$300,000 per incident (accident), at a bare minimum. However, we suggest that you buy higher limits if you have substantial assets that you want to protect. Also, in order to be able to purchase Uninsured/Underinsured Motorist Coverage ("UIM Coverage”) (discussed below), you will be required to also have Bodily Injury Liability coverage with the same amount of coverage as the amount of coverage that you desire for the UIM Coverage.
• Uninsured/Underinsured Motorist Coverage ("UIM Coverage”). This is insurance coverage that comes into play when the at-fault driver has either no Bodily Injury liability coverage or has Bodily Injury liability coverage with low coverage amounts (such as $10,000). In such a situation, your Uninsured/Underinsured Motorist Coverage will, in essence, "step into the shoes” of the uninsured/underinsured driver, and, in effect, provide liability insurance for that driver up to the limits of coverage that you buy. With a large percentage of Florida drivers having either no Bodily Injury Liability coverage, or having such coverage but with low limits, UIM coverage can play a key role to help protect you from financial ruin if you are seriously injured as a result of the negligence of an uninsured or underinsured driver.
• Recommended Coverage Limits: I recommend that you get as much UIM Coverage as you can afford. Practically, however, you will be limited by the insurance company by the amount of coverage that you have for your BI Liability Coverage (see above). For instance, if you have BI Liability Coverage in the amount of $100,000 per person/$300,000 per incident (accident), you will be allowed to buy UIM Coverage in that same amount, but not more. But know that there is a way to get more UIM Coverage than your BI Liability coverage by buying a "Stacked” policy. See the discussion immediately below on this immediately below under "Important Tip”.
• Important Tip: When buying UIM Coverage, always insist on a "Stacked” policy; and never agree to a "non-stacked” policy. You want the policy to "stack”. What this means is that if you have more than one vehicle on the policy, you can "stack” them all together in order to increase the limits of your UIM Coverage. For instance, if you are insuring two vehicles on the same policy and you have $100,000 in BI Liability Coverage, you will have $200,000 in UIM coverage. If you are insuring three cars, you will have $300,000 in UIM Coverage. The insurance agent may try to get you to sign a "waiver” of the "stacking” mechanism, but don’t ever do so. Buying a "Stacked” policy is only slightly more expensive than a non-stacked policy, and is well worth the additional expense to protect yourself and your family.

2. "Should-Have” Coverages In addition to the "Must-Have” Coverages, there are a number of additional coverages that you should seriously consider purchasing.
• Collision Coverage. This coverage will pay for the damage to your own car involved in an accident even if the accident was your fault or the at-fault driver is uninsured.
• "Gap Coverage”. This coverage will protect you if your car is a total loss following an accident and you owe more on the vehicle than it is worth. Gap coverage will pay the difference; otherwise you will have to absorb this loss.
• Extended Personal Injury Protection Coverage (Extended PIP). As discussed above, you are required to have PIP coverage, which will pay for 80 percent of your medical expenses and 60 percent of your lost wages up to a combined maximum of $10,000. You can buy Extended PIP Coverage in an amount greater than $10,000. As $10,000 for medical expenses and loss of earnings does not go very far, we recommend increasing your PIP Coverage to $50,000 to $100,000.
• Medical Payments Coverage ("Med Pay Coverage”). This coverage will pay for medical bills that are not covered by the PIP Coverage. Remember, regular PIP Coverage only covers 80 percent of medical bills up to $10,000, and you will be responsible for the remaining 20 percent if you don’t have Medical Payments Coverage. This coverage is especially important if you either don’t have health insurance or have health insurance with a high deductible or co-pay. If you have health insurance, it will kick in after the PIP Coverage is exhausted, but you could find yourself looking at paying a substantial sum out-of-pocket if you have a large deductible. We recommend that you buy Med Pay Coverage in the amount of at the very least $5,000.

3. Umbrella Policy. Different insurance companies have different maximum coverages that they will underwrite. For instance, some insurance companies will only write policies with BI Liability Coverage limits of $250,000 per person/$500,000 per occurrence (accident). If you want coverage over those limits, consider buying an "Excess Policy,” sometimes called an "Umbrella Policy.” These policies are oftentimes very economical and worthwhile, given what’s at stake. An insurance agent can provide you with Umbrella Policy options to go along with your underlying automobile insurance coverage.

We hope that this has given you some helpful information. Adequate automobile insurance should be a priority—as important as having homeowner’s insurance. The time to reassess your automobile insurance needs is NOW; if you wait until you have an accident before doing this, it will be too late. Commit to yourself that you will make a few calls to different insurance companies TODAY to shop around. You don’t want to be kicking yourself for putting it off until it is too late.