What To Consider When Purchasing Auto Insurance



I. General Auto Insurance Policy Information:

In most cases, automobile insurance policies are made up of two components:

1. Coverage Information Page: This is usually one or two pages that contain the name of the policyholder(s), your address (you should always give accurate address information, as it is used to rate your policy, and is the assumed daily storage location for your vehicles), your policy number, the applicable dates of your policy, the specific types and amounts of coverage, and in many cases, the itemized cost of the various coverages for each vehicle insured. You will receive a new or replacement coverage information page (sometimes called a coverage sheet) for each new policy period.

2. Actual Policy: This document is usually a preprinted booklet that contains no specific information related to the policyholder, but which sets out the specific contractual terms of your policy, and to which you must refer to see whether you have coverage under a specific set of factual circumstances. Your relationship with your own insurance company is, in virtually all respects, defined by the actual written contract between you and your insurance company; that is, the actual policy and the coverage information page. Claims by you, or those persons considered insured persons under your policy, are collectively referred to as First Party Claims. Claims made against you by persons who are not considered as a person insured under your policy are referred to as Third-Party Claims. A discussion of who may be entitled to make a claim as an insured person under your policy is complex and beyond the scope of this memorandum. It can be many years between the dates you are provided with a new or replacement policy. It is not at all unusual for your policy to contain one or more addenda, or change sheets, usually referred to in your policy as "attachments," "amendments," or "endorsements." These endorsements to your policy are as much a part of your policy as the master policy itself, and they always change something that is in the master policy document.

II. Bodily Injury Liability Coverage:

Carry as much bodily injury liability coverage (usually referred to in your policy or coverage declaration page as "bodily injury liability," or "personal injury liability" as you can reasonably afford. Not only does this protect you in case of a claim against you by someone who might be injured by the negligent operation of your vehicle, but it will permit you to purchase higher uninsured motorist limits (discussed below). In the case of this coverage, more is always better. Please keep in mind that Florida has a legal policy called the "dangerous instrumentality doctrine" and under that doctrine, a self-propelled motor vehicle is considered a dangerous instrumentality, which means that both the owner of the motor vehicle (merely based upon legal ownership), together with the negligent driver of that vehicle, are jointly liable to persons injured by the negligent operation of that vehicle.

This coverage is normally expressed as either split limit coverage ($50,000/$100,000, or, perhaps, $250,000/$500,000), or may be expressed in terms of a single overall limit coverage ($200,000). In split coverage situations, the first number refers to the maximum amount of money your carrier will pay to any one person who files a third-party liability claim against you, and the second number refers to the maximum amount of coverage your carrier will pay for any one accident or incident, regardless of the number of claimants. Single limit coverage is, in all respects, better than split limit coverage, assuming the second number or amount of the split limit coverage is the same as the single limit coverage amount, but the policy may include other damages, such as property damage in this amount.

III. Uninsured/Underinsured Motorist Coverage:

Carry as much uninsured motorists (U.M.) coverage (sometimes referred to as either uninsured or underinsured motorist coverage, or both) as you can afford. This protects you in case someone else negligently operates their vehicle, causing you or a member of your household (and, sometimes, merely a person riding in your vehicle) to be injured while in your vehicle. This coverage also follows you if you are riding in some other person's vehicle and are injured.

If someone injures you who carries either no liability insurance or, say, only $10,000 in liability coverage, then, if they have $10,000 in coverage, the first $10,000 will come from them, and, if you have, say, $100,000 in U.M. coverage, the next $100,000 will come from your own company. Of course, the value of your claim governs what you can collect from another person or from your own carrier regardless of the amount of coverage. Essentially, your company simply steps in and acts like it is the liability insurance company of the person who negligently injured you. U.M. coverage applies only to bodily injuries and not to property damage. Of course, your company only pays the reasonable value of your claim, up to the maximum of your coverage (that is, if someone with no liability insurance causes you to break a finger, then your U.M. carrier might pay a few thousand, but not $100,000, unless you make your living as a concert pianist and can no longer work, in which case you probably will wish you had purchased $1,000,000 in U.M. coverage.)

There are two types of uninsured/underinsured motorist coverage, stacked and unstacked. Stacked coverage merely means that you multiply the amount of U.M. coverage(s) by the number of vehicles covered under your policy to determine the amount of coverage. So, if you have three vehicles covered under a single policy, with $25,000/550,000 U.M. coverage and you have unstacked coverage, the coverage available for those injured in your car is $25,000 per person, $50,000per incident, but if you have stacked U.M. coverage under that same policy, then your coverage is $75,000 per person, $150,000 per incident (that is, three times $25,000/550,000). Always cover multiple vehicles under a single policy rather than separate policies, where you are able to do so. Therefore, if you can, always buy "stacked" U.M. coverage. We won't go into why, just buy stacked if you can, even if you are only insuring one car with that company. Another simpler way to remember the difference between stacked and unstacked U.M. coverage is that stacked is good, unstacked is bad. The added cost of stacked over unstacked coverage is usually quite reasonable. Many companies will not sell stacked coverage if only one vehicle is being insured with that company, but some will. Always ask, always buy stacked if you can, and never, ever be persuaded by some insurance salesperson that you don't need stacked coverage because you are insuring only a single vehicle under your policy or that buying stacked coverage (in the case of multiple cars insured under one policy) unnecessarily adds to the cost of your insurance. Many insurance sales agents are not well-versed as to the benefits of U.M coverage in general, much less stacked verses unstacked U.M. coverage; particularly, sales agents you will likely encounter if you buy your vehicle insurance from some national company over the phone, as they are generally at the bottom of the insurance food chain, and know as much about U.M. coverage as does the average practicing shepherd.

We cannot overemphasize the necessity for buying as much uninsured/underinsured motorists insurance coverage as you can afford. In many cases, it is difficult, if not downright impossible, to tell from your coverage information page whether or not you have stacked or unstacked uninsured/underinsured motorist coverage. In many cases a mere letter, such as "U" designates either stacked or unstacked coverage, and you will need to refer to the actual policy to determine which form of this coverage you are carrying. If you ever deal with an agent who suggests you save money by cutting your U.M coverage, move to another agent as soon as possible.

You can waive your right to carry U.M. coverage, but to do so you must sign a written waiver. The person purchasing the coverage who signs a U.M. waiver form waives the coverage not only for himself or herself, but also on behalf of all others who might otherwise be covered. Your signature on the waiver represents a conclusive presumption that you knew what you were doing, and that you intelligently waived the coverage. Your written waiver will control, even if you really did not understand what you were doing, or even if the agent misrepresented the issue to you. So be very careful what you sign when it comes to U.M. coverage. In all respects, it is our personal belief that U.M. coverage is the most important of all the coverages you can purchase.

IV. Property Damage Liability Coverage:

This is the same type of coverage as the bodily injury liability coverage, except instead of covering persons whom you, or someone driving your vehicle with your permission, might injure physically, this coverage insures against damage that may be caused to their property by the negligent operation of your vehicle. At least $10,000 of property damage liability coverage is required by law (Florida Statute §324.022). There will be a specific amount for this coverage stated on your policy coverage information page. This will either be expressed as simply a separate amount for this coverage or it may be shown as a separate additional number added to your liability split coverage amounts (a $25,000/$50,000/525,000 policy would be one in which the bodily injury liability coverage is $25,000 per person, $50,000 per incident for bodily injury, arid coverage for property damages to the other vehicle/vehicles or someone's other property), or it may be a combined part of your bodily injury liability coverage.

V. Personal Injury Protection Coverage (AKA P.I.P. Coverage):

This is no-fault coverage and covers you and, in many cases, anyone else injured in your car, regardless of fault. Basic P.I.P. coverage in Florida is $10,000,00, and this coverage is required by law.

Note: There have recently been very important changes made to the Florida P.I.P laws, if you have any questions regarding P.I.P please contact us and we will be happy to discuss with you.

VI. Medical Payments Coverage:

This is a form of no-fault coverage that applies to anyone injured due to the operation of your vehicle. This is usually expressed as a single limit and can be in any amount from $1,000 to as high as the company will offer. Even though this coverage is sometimes duplicitous of P.I.P coverage (discussed above), it is good coverage to have, and is relatively inexpensive. It pays only medical (health related) bills only, and usually has some time limitation. As discussed above, it will also pay the 20 percent of your medical expenses that are not paid under your P.I.P. coverage.

VII. Specialty Vehicle Collision And Comprehensive Coverage:

If you are insuring a specialty vehicle such as an antique vehicle, a street rod, a motor home, a trailer, a home-built vehicle, or any other vehicle that is not normally bought and sold on the motor vehicle market, you need to be especially careful when buying collision and comprehensive coverage. WHEN BUYING COLLISION AND/OR COMPREHENSIVE COVERAGE FOR A SPECIALTY VEHICLE, BUY ONLY "AGREED VALUE" COVERAGE. Your regular auto policy with such companies as Allstate or State Farm has collision/comprehensive coverage known as A.C.V. or Actual Cash Value coverage. It means that they will pay for covered repairs, less deductible, or in the case of a total loss, the actual cash value of the vehicle, less deductibles. All A.C.V. coverages contemplate significant reductions in the value of your vehicle based on it being worth less every day you own it (depreciation). Many specialty type vehicles actually appreciate in value, although mine never seem to. You don't want to argue with your carrier if the vehicle you paid $20,000 for last year, burns or gets stolen, and they offer you only $12,000 for the vehicle, saying that their investigation indicates that your "pride and joy" was only worth $12,000. If you don't agree with their valuation, you can hire a lawyer, and sue them (at your expense, of course). Another term you will see when talking about collision/comprehensive coverage is "stated value." Generally, always buy agreed value coverage if you possibly can. Stated value policy will pay up to, but never more than, the stated value, but will not necessarily pay the stated value in the event of a total loss or theft.

VIII. Umbrella Coverages:

Umbrella coverage merely extends your bodily injury liability coverage, and your uninsured/underinsured motorist coverage beyond the limits of your regular automobile insurance policy. The coverage amount is over and above the regular policy limits, and these coverages are normally issued in one million dollar increments. Though umbrella policies are sometimes offered by the same carrier as your regular automobile insurance carrier, these are separate policies. All umbrella carriers have underlying liability insurance coverage limits that you must carry to be eligible for umbrella coverage. Most usually require a minimum of $250,000 to $300,000 in underlying coverages. The cost of this extra coverage is much less than the cost per dollar for your regular insurance policy.

You should shop around for your vehicle coverage every year, so that you can be sure you are getting the best deal available, as rates do change frequently for most policies. However, be aware that some companies offer increasing percentage discounts for folks who keep their policies with that company over many years or have multiple policies (homeowners or life) with the same company. However, a policy premium of $1,000 per year with a 10 percent discount, is not as good a value (all other things being equal) as a policy with an $850 premium for the upcoming year.

IX. Summary

Finally, take the time to actually sit down and read your coverage sheet and your policy of insurance. We cannot overemphasize the necessity for you to understand what is and what is not covered under your policy. When in doubt, read the policy. Your goal should be to become a more knowledgeable insurance consumer. The more you understand about that mysterious document known as your automobile insurance policy, the better you will become at evaluating the benefits of competing motor vehicle insurance offerings.

In sum, in order to stay on top of the insurance situation in America, you need to make a lot of calls, talk to a lot of folks, and do your homework!