Seigel Law Guide To Purchasing Auto Insurance
Insurance policies are confusing. We often think the insurance industry purposely writes them in that way on purpose. At Seigel Law, we deal with clients’ insurance policies every day. In general, our clients do not understand the coverage they have selected—very often to their detriment.
With many policies purchased online, there is no one to answer questions. You are on your own in an insurance maze. Many clients come into the office and claim to have full coverage only to learn that full coverage is neither a legal nor an insurance term. Sadly, it is only after an accident that many clients learn they have made the wrong selections on their insurance policies, some with dire consequences.
In this guide, we hope to explain the terms and our recommendations, in order to help you avoid mistakes in purchasing your policy.
1. BI Coverage
When most people talk about coverage they are generally talking about BI coverage. BI stands for bodily injury and the coverage you select protects you from claims caused by your fault or the fault of a driver of your vehicle. BI coverage can be CSL (combined single limit) such as $300,000, which means your insurance company will pay up to $300,000 for the total claims of all injured parties. Most BI coverage is split limits such as $250,000/$500,000, which means your insurance company will pay up to $250,000 to any single injured person and up to $500,000 to any group of injured persons with no single injured person getting more than $250,000. Often, clients renew their insurance without reviewing the limits.
Our recommendation:
Select $500,000/$1,000,000 BI coverage.
2. UM and UIM Coverage
UM stands for Uninsured Motorist Coverage and protects you and your family members who are injured in an accident by a careless driver who is uninsured or who left the scene (hit and run). UIM stand for Underinsured Motorist Coverage and provides protection for you and your family members if a careless driver’s coverage is less than your coverage, and thus “underinsured.” For example, if you selected $500,000 UM/UIM coverage and you were seriously injured in an auto accident by a careless driver who had only $35,000 coverage, you could obtain an additional $465,000 from your own policy under your UIM coverage.
UM and UIM coverage protects you and your family. The insurance companies will only sell you UM/UIM coverage to the extent of your BI coverage. Many times we see clients with $500,000/$1,000,000 coverage, which protects strangers they injure with only $100,000/$300,000 UM/UIM coverage, which protects them and their families.
Our recommendation:
Select UM/UIM coverage equal to BI coverage.
3. No Limitation on Lawsuit Option
This option is the most confusing of all, and it’s easy to understand why the insurance companies don’t clarify. When purchasing car insurance, you must select a lawsuit option which determines the type of injury you must sustain in order to seek money damages for your injury.
If you select the No Limitation on Lawsuit option (also known as Zero or No Threshold), you may seek a claim for money damages or to file a lawsuit if you sustain any type of injury.
If you select the Limitation on Lawsuit option (also known as the Verbal Threshold), you forfeit the legal rights for yourself, your spouse, and any children who reside with you to make a claim for monetary damages or to file a lawsuit against a careless driver unless you sustain one of the following types of injuries:
- Death
- Dismemberment
- Significant disfigurement or scarring
- Displaced fractures
- Loss of a fetus
- Permanent Injury
Beware: If No Limitation on Lawsuit (Zero or No Threshold) is not specifically selected, the consumer automatically receives the verbal threshold. Shockingly, 92% of policy holders in New Jersey have the verbal threshold because they either don’t understand the option or decline to specify this option. Don’t make this mistake
Our recommendation:
Select the No Limitation on Lawsuit option.
4. PIP Coverage
In New Jersey your auto insurance pays your medical bills. PIP, standing for Personal Injury Protection, is that portion of your auto insurance policy that pays your medical bills. Standard PIP provides you and your family with $250,000 of medical coverage, per person, per accident. Medical costs are expensive. Insurance companies have begun offering lower PIP coverage. Don’t be tempted to select lower coverage and leave yourself and your family open to unpaid medical bills.
Our recommendation:
Select standard PIP coverage of $250,000.
5. Make PIP Primary
Many insurance companies will try to convince you to make your health insurance primary for the medical bills you incur in an auto accident instead of PIP. Don’t be fooled. Electing health coverage as primary is a mistake. Your health insurance plan may not cover all expenses or all family members. Health insurance may also have high deductibles, may limit treatment, and may require you to be treated by “plan doctors”. Plus, you may need to reimburse your health carrier for the bills it paid.
Our recommendation:
Select PIP primary.
6. You Get What You Pay For
We’ve all heard that before and it’s particularly true of auto insurance. Clients who “save 15% in 15 minutes” on their car insurance often learn too late that they have made grave selection errors on their policies. We have witnessed our clients’ dismay upon realizing that they splurged on high BI coverage (protecting strangers) but scrimped on UM coverage (protecting themselves and their families). We regularly meet with folks who elected to save money on their policies and chose low PIP coverage and are left with insurmountable medical bills after an accident.
Our recommendation:
Buy the highest coverage you can afford.
7. Auto Insurance Checklist
A. Type of Policy
B. Policy Limits
C. Lawsuit Option
D. PIP Medical Expense Benefits