OK, you’ve got PIP, PD, Medical Payments, Collision, Comprehensive, how much Bodily Injury (BI) coverage to you need? (Don’t remember what all that means? Click here for Auto Insurance 101). First, you are not currently required to have Bodily Injury coverage on your auto insurance policy in the State of Florida. At least, not yet (click here for my blog on the legislative issues surrounding PIP v. BI). So, why would you want it? Well, you want it in case you are at fault in an accident and you injure someone else. What does it do? It pays for the loss of the person you injured. Why do you want that? Because if you don’t have BI coverage, then your insurance company will not pay anything for the other person’s injuries. Who will? You. Out of your own pocket.
Now, from a practical perspective, if you don’t have any assets (own a home, a car or boat, investment property, investment accounts), then the reality is that you probably are not going to be sued by anyone. If, on the other hand, you do have these things and you don’t have Bodily Injury coverage, you are bearing the risk that if you injure someone in an accident, you will lose some of those assets. So, if you have those things, then you really need to have Bodily Injury coverage.
Limits of Coverage – Refresher Course
Most auto polices offer Bodily Injury (and Uninsured Motorist) coverage in a “per person, per accident” format. In other words, the limit of the coverage (the maximum the insurance carrier will pay for any single loss) is usually set up with a limit for each individual (person) and a total limit (regardless of the number of people injured) per accident. So, if you have coverage limits of $25,000/$50,000, that means your carrier will pay a maximum of $25,000 to each injured person, but no more than $50,000 for the accident combined (if there are three or more people injured, then it can become a problem because they can’t all get the $25,000 limit). How much do you need? Answer: how much do you have? You need enough coverage to protect your assets. If you have a lot of assets, you need a lot of coverage. Even if you don’t have any assets, it is wise to carrier at least some BI coverage.
Moving on! If you don’t have Bodily Injury Coverage, then this could happen to you:
You rear-end someone. You injure them severely. They need surgery. You have no Bodily Injury coverage. You get a demand letter from a lawyer representing either the injured person, or in the event the injured person had Uninsured Motorist coverage (more on this later), their insurance company. The letter asks you to pay $100,000. If you have that in your bank account, you are probably going to pay it. But let’s say you have this: $5,000 in your checking account, $20,000 in savings and $25,000 in an investment account; you own a boat, a car and a home. You can’t pay the $100,000 in cash. You tell them sorry, but you can’t pay. You get sued. You either have to hire a lawyer and fight, or you agree to a judgment, just to avoid having to pay $75,000 in defense costs. So a judgment gets entered against you for $100,000. The first thing that will happen is you will have a $100,000 lien placed on your house. If your house is homesteaded, they can’t foreclose on you, but when you go to sell it, if there is anything left over after your mortgage gets paid, it will go to satisfy the lien, which will have accumulated statutory interest. They may force you to sell your boat, or pay what you can from your savings or investment.
Sound like fun? Nope. So, that’s why you need Bodily Injury (BI) coverage. It protects your assets.
UNINSURED MOTORIST COVERAGE – A MUST HAVE!
Now, let’s turn the table. If BI protects your assets, then what does Uninsured Motorist (UM) coverage do? You guessed it, it protects your…well, er, um…your person, if you are the one who is injured. Let’s say in the example above, you are the injured person. The other driver has no BI coverage and has very little in the way of assets (which is the reality for most people who do not carry BI coverage). When there is either no BI or not enough BI, if you purchased UM coverage, you purchased coverage for the other driver’s negligence. What?! Why in the world would you insure the other driver’s negligence?! Because if they don’t, you are the one left holding the ball (and $100,000 in medical bills and/or lost wages).
Uninsured Motorist coverage is, IMHO, the single most important coverage most people can have. Why? Because you don’t control what kind of coverage the other driver has. They may have $1,000,000, or $10,000, or zero. You do control how much UM you purchase. How much should you purchase? Answer: as much as you can reasonably afford. $100,000 sounds like a lot, but if you need a surgery, it goes fast.
Let’s look at what happens if the other driver has no BI coverage:
You are sitting at a red light. You hear the dreaded screeching of breaks for a split second before BOOM! A car slams into the rear of your car. You are pushed into the vehicle in front of you. Your airbag deploys, knocking you silly. EMS arrives and you are carted off to the hospital. Turns out you have a concussion, a neck injury and the seat belt did a number on your shoulder. You need neck surgery. It costs $70,000. You are out of work for six months, since you earn $60,000 a year, you just lost another $30,000. You can’t play with your kids and now you get headaches from your concussion every day. You have had over $100,000 taken from you. The other driver has no Bodily Injury coverage. Thank God you were smart and bought Uninsured Motorist coverage with limits of $100,000/$300,000, stacked. If you didn’t, well…let’s not go there.
Stacked? What is that? If your UM coverage is “stacked”, that means if you have more than one car on your policy, the coverage for each car gets stacked on top of each other. So in the case above, you have two cars on the policy, which gives you UM limits of $200,000 per person, $600,000 per accident. End result above: your loss is covered by the $200,000 in UM coverage you so wisely purchased. Had you not purchased UM coverage, you would be eating your loss. Too bad, so sad, you didn’t buy Uninsured Motorist coverage.
In the above example, if the at fault driver carried Bodily Injury coverage of $25,000 per person, $50,000 per accident (the limits that are currently being considered as mandatory by the Florida Legislature), the driver’s insurance carrier is probably going to offer those limits of $25,000 to you (don’t accept them without the approval of your UM carrier!), but you are still out a lot of money. You still need Uninsured Motorist coverage! Why? Your Uninsured Motorist coverage is also Underinsured Motorist coverage. It will pick up where the BI left off and pay your loss that exceeds the other driver’s Bodily Injury limits of coverage.
How often does it happen that other drivers don’t carry BI at all, or don’t carry enough? All of the time. I cannot emphasize enough the importance of having Uninsured Motorist coverage. If you want to protect your…person, call your agent today, make sure you have it, buy as much as you can afford…and STACK IT!
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