Car insurance is indispensable; and, it’s an agreement between the insurance company and the car owner. So you need to know what you’re buying and – more importantly – what you’ll get. Here are the basics you need to know about your car insurance policy – to protect yourself – in plain English.
Auto insurance is a contract. An agreement between you (the insured) and the insurance company (the insurer). It’s basically an agreement whereby you pay the insurance carrier a premium in exchange for a policy of insurance that provides benefits in the event of loss or injury to property or person.
A standard New York (and similarly with other States) auto insurance policy provides for the following major lines of coverage/ benefits:
I. No-Fault Benefits: If you as a driver or passenger in a car are injured, the host vehicle (the car you are either driving or a passenger in) must pay for the medical and related expenses. If you are a pedestrian, the vehicle that struck you will pay the insurance expenses. Even if you have health insurance (like GHI or Empire Blue Cross Blue Shield), it is still the host vehicle’s insurance carrier which must, by law, pay the medical expenses for the injuries you suffer. This is true even if you as the driver were at fault in causing the accident and your injuries. No-Fault insurance pays for all the necessary and related medical expenses, such as the hospital, labs, tests, surgery, doctor and specialist visits, prescribed medications, devices, over-the-counter medicines, transportation to and from the doctors and clinics, and wages you lost because you were unable to work. It is smart to keep receipts and a log of all the health care providers you see and treat with. It is important that you file the no-fault claim within the 30 day deadline or else you may very well forfeit all of these benefits.
II. Property Damage: This protects you as the owner or driver of a car that causes damage to property (usually to another car) as a result of your negligence or carelessness, whether you were completely at fault or only partially at fault. So, if you disobey a red light and crash into another car and damage it, your car will pay the owner of the other car the amount of damage caused by this accident. Or, if you are inattentive and crash your car into someone’s house, your insurance carrier will pay for the damage you caused to that house.
III. Bodily Injury Protection: This protects for injury to a person. So, let us take the example where a driver disobeys a red light and crashes into your car causing you to sustain personal injuries. In addition to the no-fault benefits that you will receive from your own car insurance (see paragraph I above), you may collect compensation for pain and suffering (loss of your enjoyment of life) for “serious injuries” from the other car’s insurance company. There is a plethora of law on what constitutes “serious” personal injury and the various compensatory values, but suffice it to say that the compensation scale varies.
IV. Un-insured and Under-insurance: This protect YOU in the event that the adverse vehicle (the vehicle which was at fault for the accident in causing your injuries) did not have insurance or did not have adequate insurance to fairly and reasonably compensate you for your pain and suffering. In New York in order to have a motor vehicle on the road, it must have minimum liability coverage of $25,000/$50,000, meaning $25,000 of coverage per person and a total of $50,000 of coverage per accident. If you are seriously injured and the other vehicle only has $25,000 in coverage, you may not be properly compensated by that vehicle’s insurance. If you have chosen to have a higher liability limit on your vehicle, say $100,000/$300,000, you are protected by your own insurance. In that scenario, you can recover $25,000 from the other vehicle and then up to an additional $75,000 from your own insurance. Therefore having high un/under insurance limits protects you. Property damage and bodily injury coverage compensate for the damage or injury to another that you cause – un/under insurance coverage protects you when the other person responsible for your damage or injury does not have enough insurance. It is well worth the (modestly) additional cost to get high un/under limits.
V. Collision and Comprehensive: Collision coverage affords you the protection of having your car repaired irrespective of whose fault the accident was. So, if you disobeyed a stop sign or were texting and smashed your car into a light pole, your car gets repaired under this coverage. Comprehensive coverage deals with fire or theft of your vehicle.
Deductibles: No-Fault, Collision and Comprehensive coverage of a policy are subject to a deductible, be it $200, $500 or $1,000. The deductible is the amount that you must pay out of pocket before you can use your insurance to pay the rest. The higher of a deductible you choose the lower your premium should be.
Choosing a car insurance company: In selecting the car insurance company that is right for you, be cautious if not weary of those catchy insurance company commercials. One important factor in reviewing an insurance company is its integrity in honoring its claims, namely first-party benefits. These are the benefits that you as the insured are entitled to without any lawsuit required. A car accident is a typical example where the injured’s medical and other related expenses are (supposed to be all) paid by the host vehicle’s insurance company (regardless if a personal injury claim or lawsuit is filed against the negligent party, which is a third-party claim for compensation). These first-party benefits are the most basic elements of the insurance contract, but you’d be surprised if not astounded to find out how many legitimate claims for benefits are denied or disclaimed by some insurance companies. Many other benefits go unprocessed (which is a further windfall savings for the insurance company) because many consumers simply don’t know what their rights are or what they are entitled to and the insurance company will not make an effort to educate their customers, other than sending out a fine-print notice which it knows most people don’t understand or will improperly or untimely submit.