Auto policies consist of two types of liability coverages, bodily injury and property damage. The bodily injury coverage is split into a per person and per occurrence limit. When named as a defendant in a lawsuit, the insuring carrier has a duty to defend the insured. When there is a legal determination against an insured, the policy limits apply towards awarded damages, medical bills, unpaid work loss, and pain and suffering of the third party. The intent of this article is to focus on first party benefits.
According to a study by the Insurance Information Institute, 13% of motorists in 2015 were driving without insurance in the United States. In addition to the problem of frequency of uninsured drivers, it is not uncommon for insurance policies designed to serve the mass market to contain low coverage limits. Uninsured/ Underinsured Motorist coverage is a critical coverage that helps protect against this issue. It is a first party coverage, designed to benefit an insured when the at-fault driver does not have sufficient insurance to cover damages sought by the insured and their family. The Uninsured/ Underinsured Motorist limit can provide coverage for medical bills, unpaid work loss, pain and suffering. It is important to note that additional or “excess” uninsured/ underinsured motorist coverage can be added to umbrella or “excess” policies. Umbrella policies designed for private client typically permit higher Uninsured/ Underinsured excess limits up to $10,000,000.
First Party Benefits or Personal Injury Protection (PIP) coverage varies across states and can be purchased at varying levels. PIP coverage provides additional coverage for medical bills and lost wages for you and family members when injured in an auto accident. These first party benefits are designed so that your auto policy will pay your medical bills regardless of the at fault driver. Most states do not require insureds to carry PIP coverage, however Florida, New Jersey, New York and Pennsylvania are among the 16 states that do require minimum medical PIP limits to be carried.
Auto insurance in many states including Pennsylvania and New Jersey allow for the insured to choose their rights when seeking legal action against an at-fault driver. In Pennsylvania and New Jersey, under a no limitation on lawsuit policy you maintain your right to a jury trial, if injured in an accident and will be compensated for lost wages and for the pain and suffering of you and your family. Under the limitation on lawsuit option, one may sue when the accident involves, death, or serious injury which can include dismemberment, significant disfigurement or scarring, displaced fractures or permanent injury. The definition of serious injury varies by state. Regardless of which lawsuit option you select, you can still sue for out of pocket expenses when harmed by an at-fault driver. Significant savings can often be seen by accepting some restrictions on your legal rights to sue.
Comprehensive and collision deductibles are important property related features of an auto policy. The comprehensive coverage applies to damage to a scheduled vehicle including theft, vandalism, hail, collision with an animal or other non-collision related events. Collision applies to any other collision including, the vehicle hitting a tree, car or pothole. Both comprehensive and collision deductibles have an inverse relationship with the premium of an auto policy; when the deductibles are increased, the premium of the policy decreases. When a vehicle no longer is deemed to be of considerable value, a policyholder may determine that collision and comprehensive coverage can be removed on a per vehicle basis, to lower the premium of the policy. The comprehensive premium is generally not a significant premium and the insured may want to continue that coverage on an older car. Deer strikes and broken windshields are probably the most common type of comprehensive loss.