7 Things to Know about Your Auto Insurance Policy before You’re in a Car Crash

The Problem:

I always ask a new client about their insurance coverage during our initial interview.

Inevitably, I get this response from the new client, “Oh, don’t worry, my insurance company told me I have full coverage.”

“Full coverage?”  

“Yes, full coverage.”

After a few more questions, we discover that my client’s policy falls short of anything resembling “full coverage.”   

Like anything in life, the more you know, the easier it is to make informed decisions.  

Yet, the incomprehensible legalese contained in many of the automobile insurance policies make them nearly impossible to understand.  Lawyers fight over the definition of terms and application of exclusions in these policies all the time--it’s no wonder the average Joe/Jane has a difficult time understanding what they mean.  

The bottom line is this: You want your insurance coverage to protect you and your family.  

The following tips will help you make the decision that is best for you and your family, not what’s best for the insurance company’s bottom line.

Before we start, some terms you need to know:

Automobile liability coverage: Generally, this is the maximum amount of money your insurance coverage will pay out to an injured party when you are the cause of an accident.  As of July 1, 2018, the minimum amount of coverage in Nevada is $25,000.00 for the bodily injury or death of each person and $50,000.00 for for the bodily injury or death of all persons injured in an accident.

Uninsured/underinsured motorist coverage “UM/UIM”: This is the maximum amount of money that your insurance company will pay you if you’re hurt in an accident caused by someone else and that person does not have insurance coverage, or they do not have enough insurance coverage to pay your damages. UM/UIM also can cover your family members, and others riding in your vehicle.  This insurance coverage protects you and your family and therefore, is the most important part of your insurance policy!

Medical Payment Coverage: This is the maximum amount that your insurance company will pay out to cover your medical bills.

[note: there are other types of coverage for property damage, but the focus of this document is coverage for injuries].

If you do not know your auto insurance coverages, check your declaration page. This is usually a one page document where your insurance company must list your coverages for you to see.

The 7 things to know:

1. Don’t be fooled that you have “Full Coverage” when in fact you only carry the state minimum amounts.

Usually, when a client tells me they have full coverage they actually only have liability coverage at the state minimum amount.  

In Nevada, liability coverage is mandatory and you have to show proof of this coverage before you can get behind the wheel. This is NOT full coverage, in my opinion.

Liability coverage will not pay for your injuries or damages if you are in a wreck.  This type of coverage only pays for damages to other people when you cause an accident.  If you are in a wreck and you’re not at fault, you may be stuck with medical expenses, lost wages, and other damages, if the person who caused the accident does not have insurance or does not have enough insurance.  Many people are surprised to find this out after they’ve been in an accident and have been told they have “full coverage.”

2.  UM/UIM coverage protects you and your family in many different situations.

UM/UIM coverage is the most important coverage you can have on your policy, and you want to have as much as you can afford.  

The catch is this. Generally, if you want more UM/UIM coverage, you have to increase your liability coverage too.  So, if you want $100,000.00 in UM/UIM coverage per person, $300,000.00 per accident, you must have the same amount of liability coverage.  This makes your policy more expensive, but if you are in an accident and the other driver does not have enough insurance coverage to pay for all of your damages, you’ll be glad you have it.

Another reason to have UM/UIM on your policy is that the coverage, in most cases, travels with you when you get in someone else’s vehicle.  If you or someone in your family are in an accident while traveling in someone else’s vehicle, you can generally still use your UM/UIM coverage if the person who caused the accident does not not have enough insurance coverage, or is uninsured.  This should give you peace of mind that when your family is riding in someone else’s car, they are covered under your policy, even if the person driving the car has cut-rate insurance.

Some people are hesitant to use their UM/UIM coverage because they are under the incorrect assumption that when they file a claim under their own policy their insurance rates will go up.  I tell my clients this. Under Nevada law, your insurance company is prohibited from raising your rates because of a claim when you are not at fault for the accident. I also tell my clients that, if you are paying for your this extra insurance coverage, you should use it--that’s what it’s for!

3. Your insurance company MUST offer you UM/UIM Coverage

This type of coverage is so important that Nevada requires your insurance company to offer you this coverage when you buy your policy. What’s more, if you’re in an accident, and your insurance company cannot prove that they offered your this coverage and that you waived the coverage in writing, you may still be able to use UM/UIM coverage.  In every one of my clients’ cases, if my client does not have UM/UIM coverage on their declaration page I always request a written waiver of coverage. If the insurance company cannot prove that my client waived the coverage in writing, I force the insurance company to provide UM/UIM coverage. This is important because the at-fault party’s insurance might be insufficient to cover my client’s needs. This is a rare situation, however. The best practice is to pay for the UM/UIM coverage up front, or if you do not have the coverage on your current policy, make the change today.

4. You should have medical payments coverage, even if you have health insurance.

This is another important coverage which I recommend for every client.  Often I hear that someone has declined this coverage because they already have health insurance.  This is a big mistake for a couple of reasons. First, the cost of the coverage is usually very small.  For a small premium you can get $1,000.00, $5,000.00, $10,000.00 or more in medical payments coverage. Generally, this coverage applies to each individual, it covers you if you’re in an accident in someone else’s vehicle, and may even cover you if you’re at fault for the accident! If you have health insurance, you likely have deductibles or copays, and this coverage will help offset those expenses. Depending on the policy, your medical payments coverage may pay out even if your insurance company covered all of your medical expenses.  

5. Your insurance company must respond to your claim in a timely fashion.

An insurer must approve or deny a casualty claim within 30 days after the insurer receives the claim. If the insurer requires additional information or time to determine whether to approve or deny a claim, it must notify you of this request within 20 days after it receives the claim, and at least once every 30 days thereafter until the claim is approved or denied.

6. One minute of insurance coverage on Expiration Date

Did you know that you do not have insurance on the expiration date of your auto insurance?

This is because your auto insurance policy expires at 12:01 a.m. on the expiration date. This means that you only have one minute of coverage on the expiration date listed on your insurance ID card.

If you plan on changing insurance companies, don’t wait until the last day to shop around and find new coverage. It is important to tell your new insurance company or insurance agent exactly when your policy expires. This will help them begin your coverage at the correct time and day without any lapse in coverage. If you are renewing your current insurance, make sure you do so a few days before the expiration date. This will help you avoid an interruption in your insurance coverage.

In addition to leaving you uninsured, a lapse in insurance coverage will result in a fine by the Nevada DMV.

7. Get  umbrella coverage, but make sure its the right kind.

In addition to UM/UIM and med pay, I always recommend that my clients have an umbrella policy. There are several types of umbrella policies.  The most common is an umbrella policy for excess liability coverage. While this coverage might be right for you, depending on your situation, the coverage I recommend is an umbrella policy for excess UM/UIM coverage.  This type of umbrella policy will cover you in the event that you have an accident involving a catastrophic injury or death. These policies generally have limits might higher than a general automobile policy. Ideally, I recommend at least 1 million in UM/UIM umbrella policy coverage.

This list is certainly not exhaustive and if you have a question about your insurance coverage, you should consult an attorney.  Give me a call at (725) 867-8495.

Thomas Askeroth