Chapter 10 – Personal Auto Policy Case – A Guide to Auto Insurance
"The best compensation for doing things is the ability to do more."
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The Loss Situations presented in this case illustrate the coverage provided by the Personal Auto Policy. The examples include covered losses and losses that would be excluded. Relevant Endorsements are discussed where applicable.
Family Auto Situations
Bob and Mary Gordon are both employed. Bob is a supervisor for a large automobile repair firm. Marie is a social worker for the State Welfare Department. Bob and Marie have two children. Karen, aged 20, is attending college 200 miles from home. Ken, aged 16, lives at home and attends high school. The Gordon’s own 4 vehicles. Marie is the principal driver of a 1-year old sedan, which she uses to drive to and from work. The car is also driven occasionally on state business.
Bob is the principal driver of a 3-year old customized van, which he uses to drive to and from work. The van is also used by the family for fishing, camping and outdoor recreation. Karen is the principal driver of a 4-year old sedan, which she uses at college and to travel home on holidays and weekends. Ken is the principal driver of a 6-year old compact car, which he drives to and from school. All vehicles are legally titled in the names of Robert and Marie Gordon.
Personal Auto Policy Coverages
No-Fault Auto Insurance does not apply in Gordon's state. Endorsement PP 03-03 is the Towing and Labor Costs Coverage and endorsement PP 03-11 is the Under-Insured Motorists Coverage with limits of $100,000 for each accident.
Loss Situations
The Loss Situations involve the various types of coverage provided by the Gordon's Personal Auto Policy. Their PAP covers not all of these losses, the comments about each loss explain the coverage that applies or why the loss is not covered.
Liability Coverage
The following Loss Situations apply primarily to the Liability Coverage (Part A) under the PAP. Each loss is a separate occurrence.
Loss - Bob is involved in an accident with another motorist who claims that Bob did not have the right of way. Damage to the other driver's car is $5,000. The other motorist also sues Bob for $100,000 and is awarded damages for Bodily Injury in the amount of $50,000. The court also awards $2,250 as a prejudgment interest. Legal defense costs incurred by Bob's insurer are $25,000.
Comment - The Property Damage Claim of $5,000, the Bodily Injury Claim of $50,000, and prejudgment interest of $2,500 is paid by Bob's insurer under the Liability Section of the PAP. The legal defense costs of $25,000 are paid in addition to the amount that Bob is legally required to pay.
Loss - Bob is confronted by an irate customer who claims that the brakes of his car are not repaired properly. The mechanic who repaired the brakes states that the brakes are fine. To determine who is correct, Bob decides to road test the customer's car. While Bob is road-testing the car, the brakes fail and Bob hits another motorist. The motorist is seriously injured and Bob is personally sued for $200,000. Damage to the customer's car is $4,000. Bob also has medical expenses of $3,000 resulting from the collision.
Comment - The Bodily Injury incurred by the injured motorist and the Property Damage to the customer's car are clearly excluded under the Liability Section of the PAP, since Bob was using the customer's car in the automobile or garage business. The medical expenses incurred by Bob are excluded under Medical Payments Coverage, since the injury occurred during the course of employment and benefits are required and available to Bob under the State's Workers' Compensation Law. The excluded Liability Losses are Commercial Loss Exposures that would be covered under a commercial Garage Liability Policy. Bob's injury is covered by the firm's Workers’ Compensation Insurance.
Loss - Ken, Bob and Marie's son was driving his girlfriend's car. After a football game, they went to a party. He was involved in an accident with another motorist who became permanently disabled from the accident. The police arrested Ken and charged him with driving while intoxicated. He was required to post a bail bond of $2,500. Ken is later convicted of driving while intoxicated. The injured motorist is awarded a judgment against Ken in the amount of $500,000. The liability limit of the girlfriend's car is $25,000.
Comment - Ken's girlfriend's PAP is primary and pays the first $25,000 of the judgment. The girlfriend's policy will also pay up to $250 for the cost of the bail bond. Gordon's PAP pays only $300,000 as Excess Insurance, since that is the applicable Limit of Liability. If Bob and Marie were insured under a Personal Umbrella Policy, the remaining $175,000 of the judgment would have been paid by the Umbrella Insurer. As a result of the driving while intoxicated conviction, Ken will most likely be excluded from future coverage under his parent's policy.
Loss - Marie is attending a professional meeting in a large city. She rents a car at the airport. While driving to her hotel, she is involved in an accident with another motorist when she suddenly changes lanes without signaling. The other driver is seriously injured and is later awarded a judgment of $250,000. The rental agency carries liability limits of $100,000 on the rental car.
Comment - The loss is covered under the Non-Owned Auto Coverage of the Gordon's PAP. The first $100,000 of the judgment, however, is paid by the rental agency's insurer as primary insurance. The Gordon's PAP pays the remaining $150,000 as Excess Insurance.
Collision and Other-Than-Collision Losses
This section deals with the distinction between Collision Losses and Other-Than Collision Losses (Comprehensive)
Loss - When Karen returned to her car after a class, the rear bumper was damaged by another driver who left no name or phone number. Damage to Karen's car cost $400 to repair.
The thief also broke a window to get inside the car. The cost of replacing the glass is $150. The following property was also stolen from the car: (1) a car radio valued at $200,
Comment - This is Common Collision Loss. In this case, Karen will receive $150 for the loss, since there is a $250 deductible. If the driver who caused the damage had left his/her name, Karen may have been able to collect the full $400 from the negligent driver's insurer. In this case, Karen or her parents must absorb the PAP deductible.
Loss - While Karen is driving home over the weekend, her car collides with a deer crossing an interstate highway. The accident caused $300 damage to the car's front fender.
Comment - Hitting a bird or animal is considered to be an Other-Than-Collision Loss. In this case, the PAP pays only $200, since a $100 deductible must be met.
Loss - Bob and Marie purchase a new pickup truck. Three weeks after the vehicle is purchased, the pickup is damaged when Bob backs the vehicle into a tree. Damage to the truck is $1,500. When the accident occurred, Bob had not yet notified his automobile insurer that the pickup had been purchased.
Comment - This is a Covered Collision Loss. Bob has 30 days to notify and ask the insurance to insure the vehicle for Collision Loss. The Collision Coverage applies to the loss and the amount paid is $1,250.
Loss - Because a state car was not available, Marie used her own car to visit a client in a high-crime area of the city. Hubcaps valued at $200 were stolen while the car was parked. (2) stereo tapes valued at $100, and (3) a camera valued at $150.
Comment - A private passenger automobile can be used in the business or occupation of the insured and PAP coverage applies. The theft of the hub caps and car radio and breakage of glass are therefore covered as an Other- Than-Collision Loss. The amount paid is $450. The theft of the stereo tapes is not covered, since loss to stereo tapes is specifically excluded. The tapes can be covered by an additional endorsement for coverage for audio, visual and data electronic equipment and tapes, records, discs and other media to the PAP. The camera theft is not covered under the PAP, since the PAP does not cover Personal Property.
Loss - While on vacation, Bob turned the van too sharply on a hairpin curve in the mountains and it overturned. The cost to repair the van is $3,500. A built-in range and furniture were also damaged in the accident. The cost of replacing the special equipment is $2,500.
Comment - This is a Collision Loss. The amount paid for damage to the van is $3,250, however, damage to the built-in range and furniture is specifically excluded under Part D. Customized equipment, however, can be insured by adding the Customized Equipment Coverage (state amount insurance) Endorsement to the Pap.
Non-Owned Auto
The following loss situations apply primarily to Non-Owned Auto Coverage.
Loss - Bob borrows a pickup from a friend to haul some wood. The pickup is stolen when in Bob's possession. The Actual Cash Value of the stolen pickup is $1,500. The owner of the pickup does not have any Physical Damage Coverage on the vehicle.
Comment - The Physical Damage Coverage - Part D also applies to a Non-Owned Auto. As noted, a Non-Owned Auto is a private passenger auto, pickup, van, or trailer not owned by, furnished or made available for the regular use of the named insured or a family member. If Bob's drives the pickup only on an occasional basis, his PAP coverage applies. The loss is an Other-Than-Collision Loss and the amount paid is $1,400.
Loss - Ken has a job as a parking lot attendant during the summer. He accidentally backed a customer's car into another parked car and both cars are damaged. The damage to the car that Ken is driving is $500, damage to the parked car is $650.
Comment - Although Ken is driving a Non-Owned Auto, the PAP excludes loss to a Non-Owned Auto when it is used in the automobile or garage business. The loss, therefore, is not covered.
Loss - Karen borrows her roommate's car with permission. She is involved in an accident in which she is at fault. The cost of repairing the roommate's car is $1,500. The roommate has a $100 deductible for both Collision and Other-Than-Collision Losses.
Comment - The PAP coverages on Karen's car apply to the borrowed vehicle. As long as Karen does not drive her roommate's car on a regular basis, the Gordon's PAP coverages apply. However, insurance on the car being driven is primary and the Gordon's insurance is Excess. The roommate’s Collision Insurance, therefore, pays $1,400 for the Physical Damage Loss to the car. The remaining $100 is submitted to the Gordon's insurer as Excess Insurance, however, because that policy has a $250 deductible, the insurer pays nothing.
Vehicles Regularly Furnished or Made Available
This section applies to Loss Situations involving vehicles that are furnished or made available for the regular use of the named insured or a family member.
Loss - Marie drives a state car daily to visit her clients. She is involved in an accident with another motorist, who is seriously injured. Investigation of the accident reveals that Marie's negligent driving caused the accident. The Bodily Injury to the other motorist is $50,000. The damage to the motorist's car is $3,000.
Comment - The entire loss is excluded. Although the PAP covers the named insured or family members while driving a Non-Owned Auto on an occasional basis, the coverage does not apply to vehicle furnished or made available for the regular use of the insured. Since Marie drives a state car on a daily basis, her PAP coverage does not apply. This important Loss Exposure can be covered by adding Extended Non-Owned Coverage to the PAP and naming Marie in the Endorsement, which covers Non-Owned Vehicles driven on a regular basis.
Loss - Karen obtains a summer job as a sales person. She is furnished with a company car. While driving the company car on company business, she is involved in an accident with another motorist. The motorist claims that Karen caused the accident. The motorist suffers injuries in the amount of $10,000. The cost of repairing the company car is $2,500.
Comment - The loss is excluded, since the company car is furnished and made available for Karen's use on a regular basis. The regular use of the company car can be covered by Adding Extended Non-Owned Coverage to the PAP in which Karen is specifically named as an insured.
Loss - Ken's car is being repaired in the automobile repair shop. He borrows a friend's car and uses it until his car is repaired. While driving the company car on company business, she is involved in an accident with another motorist. The motorist claims that Karen caused the accident. The motorist suffers injuries at a value of $10,000. The cost of repairing the company car is $2,500.
Comment - The loss is excluded, since the company car is furnished and made available for Karen's use on a regular basis. The regular use of the company car can be covered by adding Extended Non-owned Coverage to the PAP in which Karen is specifically named as an insured.
Loss - Ken's car is being repaired in the automobile repair shop. He borrows a friend's car and uses it until his car is repaired. While driving the vehicle, Ken is involved in an accident with a motorist who claims that Ken did not have the right of way. Investigation of the accident reveals that Ken is at fault. The injured motorist sues Ken for $15,000.
Comment - Since Ken's car is being repaired, the borrowed vehicle is considered a temporary substitute vehicle. Therefore, all PAP coverages on Ken's car apply to the temporary substitute vehicle. The injured motorist's suit is a Covered Liability Loss, however, any insurance on the borrowed car is primary and Ken's insurance is excess.
Other Loss Situations
The following sections discuss some miscellaneous Loss Situations.
Loss - Karen’s car will not start. A wrecker tows the car to a service station where a defective water pump is replaced. Towing charges are $40. The cost of replacing the water pump is $150.
Comment - The towing charges are covered for only $25, since this is the applicable Limit of Liability. The cost of replacing the water pump is not covered because only labor performed at the scene of the disablement is covered.
Loss - While Bob is walking across the street, he is struck by a driver who runs a red light. The driver has no Liability Insurance. Bob's claim for Bodily Injuries totals $35,000.
Comment - Bob's $35,000 claim for Bodily Injury will be paid in full under the Uninsured Motorist Coverage. The Under-Insured Motorists Coverage does not apply in this case, since Bob was injured by an uninsured driver.
Loss - While driving home from work, Marie is seriously injured by a drunk driver who was driving in the wrong direction on a one-way street. Marie's claim for bodily injuries is valued at $45,000. Marie's sedan, valued at $12,500, is totally destroyed. The negligent driver carries Liability Insurance in the amount of $15,000/30,000/10,000, which satisfies the state's minimum Financial Responsibility Law.
Comment - The Under-Insured Motorists Coverage is relevant here. Marie will collect $15,000 for her injuries from the other driver's insurance company, since that is the maximum Limit of Liability per person. Marie's PAP insurer will pay $30,000, the difference between the $15,000 collected from the other driver's insurer and the total value of her injuries. The Physical Damage Loss of $12,500 to Marie's car exceeds the other driver’s $10,000 Property Damage limits. The negligent driver's insurer will pay the $10,000 limit, Marie's insurer will pay the remainder of the loss.
Summary
As one can see, there are multiple situations that may arise, which can test the flexibility of the Personal Auto Policy. As we move into the section concerning the Personal Auto Policy, we will list several ideas that should be addressed when discussing proper coverages for the Personal Auto Policy.
A Guide to Auto Insurance
Americans spent an average of $638 per car on Auto Insurance in 1993, the latest year for which data is available. If we were paying that much for a TV, we would certainly shop around, yet, with Auto Insurance most people don't. Consumer's Report conducted a survey and asked their readers whether they had shopped around the last time they bought or renewed insurance, only 4 out of 10 said they did. Two things make it difficult to shop for Auto Insurance: companies can charge widely different prices for similar coverage and the quality of service is impossible to judge until one is unfortunate enough to be in an accident.
Reasons for Escalating Rates
We have been able to narrow down to 9 reasons why Automobile Insurance is so expensive, however, before listing the reasons, consumers must be made aware that insurance isn't meant to cover every dent and scratch. That type of coverage would surely add many dollars to the premium. Like other kinds of insurance, Auto Insurance is best used to protect one against expenses that would not otherwise be affordable. One should depend on the insurance company only for major losses. The reasons Automobile Insurance tends to be expensive are:
3. in some cities theft is rampant.
5. there's more litigation and higher settlements in injury cases.
6. badly designed No-Fault Laws encouraged litigation rather than discourage it.
7. more buyers have been choosing small or sports cars, which generate more collision and injury claims that big cars.
8. By law, insurance companies are allowed to exchange price information thus lessening competition.
9. In some states, inept regulation has forced even good drivers into Assigned-Risk Pools, where they are charged extra for their coverage.
Now that we have reviewed the reasons for high Auto Insurance rates we will discuss ways to keep consumer's rates reasonable. We also will cover actions one should take if an accident does occur and when an accident victim should seek legal representation.
Tips On Purchasing Auto Insurance
The 3 areas that the typical auto premium dollar are allocated to would be: Bodily Injury Coverage, Collision and Property Damage Coverage. We will discuss these 3 first.
Bodily Injury Liability - This is the coverage which most protects against financial ruin. As noted before, this coverage pays for the other
person's medical treatments rehabilitation or funeral costs when an insured is found to be at fault in an auto accident. Each state requires drivers to have some level of Liability Coverage. This coverage is absolutely essential! Determining the amount of the coverage is the question. We believe 3 areas of this coverage should be addressed.
1. Protect Assets - This means that by purchasing enough insurance to cover the highest judgment one might reasonably be called upon to pay, the consumer has effectively become lawsuit proof. If the insured does not own much besides the car, and then they should buy only the minimum that the state requires, possibly $10,000 for each person injured, up to a cap of $20,000 for the whole accident. Although one could be sued for more, it is unlikely be cause there is no chance of payment. By contrast, a homeowner might want to insure $100,000 for each person injured, with a maximum of $300,000 per accident, or even a straight $300,000 per accident. The wealthy should consider $500,000 to $1,000,000 worth of coverage or more. The richer, the more protection needed.
2. Protect yourself - If one is hurt by a driver who is uninsured (or under-insured), he/she can be covered by their own policy. One cannot collect any more than he/she bought to protect the other individual. A $10,000 cap for the other individual means a $10,000 for the insured also.
Collision Coverage - Essential for new cars, useful as long as a car has sufficient value. This portion of the policy covers repairs to the insured's own car after an accident, no matter who caused it. If the car is totaled and it was financed, the insured will need the insurance to repay the loan.
The price of Collision Insurance depends on the size of the deductible. The higher the deductible, the less the insurance will cost. If the accident wasn't the insured's fault, the insured's insurance company will arrange for the deductible to be paid by the other driver's policy. Collision Insurance is generally written to cover the cars’ Fair Market Value, define its book value (determined by standard tables), minus the cost of making repairs, minus a charge for unusually high mileage.
It would be wise to drop the coverage on cars so old or so dented that their value is nominal. Our guess is that nominal means something under $15,000.
Liability for Property Damage - This pays for someone else's property, usually the car, but sometimes a store front or gasoline pump. We recommend that consumers at least cover the Fair Market Value of the average car, say $15,000, or $60,000 if one worries about hitting a new Mercedes. Keep in mind, that the standard minimum is about $10,000 and it will not cost much to upgrade this portion of the liability to at least $25,000 at the same time the insured increased Bodily Injury Liability Coverage.
The last four coverages that a typical auto premium dollar is sliced into are: Other-Than-Collision (Comprehensive), Uninsured Motorists Coverage, Medical, and Personal Injury Protection (PIP).
Comprehensive - Essential for new cars; useful even for older ones. This pays for random damage to the car from fire, flood, vandalism, hail, pets chewing the upholstery and the odd stone thrown up on the highway. It will also cover theft. Deductibles range from $50-$500, the higher the deductible, the cheaper the insurance.
Comprehensive Insurance covers the car's Fair Market Value, which generally declines with time. Many drivers keep their Comprehensive even after dropping Collision, because Comprehensive tends to be cheaper. Still, the insurer will not pay anything more than the car is worth.
Uninsured Motorists Coverage - This coverage is required in many states; if not, it is still valuable to have. As noted, this coverage pays the cost of the insured's own injuries if hit by: an uninsured driver who is at fault, an at-fault driver whose small insurance policy will not cover all the insured's damages, or a hit-and-run. It also covers lost wages.
Many consumers feel that this coverage is useless. Why bother with Uninsured Motorists Coverage if the insured has life, health and disability policies that already protect the family, cover injuries and pay an income? One reason might be that Uninsured Motorists Insurance covers more. If the insured didn't cause the accident, or was clipped by a hit-and-run driver, he/she may be able to collect a sum for pain and suffering. That could help with other expenses, like support systems if the insured becomes disabled. Another reason might be that, due to the nature of the insured's work, good Disability Insurance is not obtainable.
If this coverage is purchased, don't skimp. Many states let insured's buy as much to protect themselves as they purchase to buy other potential accidents victims. In No-Fault states, the Uninsured Motorists Coverage clicks in if the insured is injured badly enough to sue. One can collect from this policy on top of his/her No-Fault Personal Injury Protection. If the insurer is satisfied with their life, health and disability insurance, Uninsured Motorist Coverage is a waste. It would be better to add to the regular Disability Policy, which covers the insured at all times, not just when driving a car. Skip this coverage too, if one lives in a state with a good No-Fault Law. In these states, No-Fault Benefits are generous and it is difficult to sue for pain and suffering.
Medical Payments Coverage - Not much of this coverage is needed in fault states. As noted, this coverage picks up the medical and funeral bills of anyone injured in the insured's car, without regard to who caused the accident. It covers the insured’s family if they are hurt as pedestrians or while riding in another vehicle, including a taxi or bus. It covers an elderly friend who stumbles while getting into the insured's parked car and breaks their hip, it offers less protection than meets the eye. Health Insurance already covers medical bills. If the insured’s Auto Insurance pays only the bills not covered by Health Insurance, any payout may be small. People injured in the insured's car may also have Health Insurance; if they want more money, they'll sue the insured. For these reasons, many people skip Medical Payments Insurance or buy $2,000 per person just to plug the deductible in a Health Insurance Policy. Remember that in No-Fault States, medical payments are tucked into the Basic Auto Insurance Policy.
Personal Injury Protection (PIP). PIP is required in No-Fault states. Insured's are covered for: their own medical bills up to a stated limit, part of lost wages and funeral expenses.
How much one ultimately collects depends on the state. There may be no ceiling or one as low as $1,000. There may be a low ceiling on each doctor bill. Insured's can usually fall back on their Health Insurance if No-Fault does not pay enough of each bill but that depends on the state.
To lower the costs of PIP, insured's should determine if their medical bills and lost wages could be paid primarily by their regular Health and Disability Insurance. If so, buy less PIP. It becomes a backup system, for expenses unpaid.
Summary
As we conclude this section, the remaining advice would be that the consumer must find out if they live in a Fault or No-Fault State. If one lives in a Fault State and is hurt in an auto accident that is the other driver's fault, they would collect from his/her insurance company. Hopefully, the other person has insurance. If the insured caused the accident, he/she will collect nothing from their Auto Insurance for their own injuries. The fault system does produce occasionally huge judgments. Once can sue not only for medical costs and wages lost but also for pain and suffering, which is often where the big money lies. But it is like a lottery!! One collects only (a) if the other person has enough insurance and personal assets to cover a judgment and (b) if the accident was his/her fault. Many injured people get much less than they deserve or nothing at all.
No-Fault State
If an insured lives in a No-Fault State and is hurt in an auto accident, his/her insurance company pays auto-medical bills and lost wages up to a certain ceiling. The insured would collect the money even if the accident were entirely his/her fault. If injuries are bad enough, one can also go to court and try for a pain and suffering award. There, the fault rules apply: one does not collect unless he/she can prove that the other was at fault. In either type of state, the insurer will investigate the case, handle the settlement negotiations, defend the insured in a lawsuit and pay any judgment against the insured up to the limit of the policy.
Ways to Save Money on Auto Insurance
There have been many suggestions over the years on how to control and reduce the rising rates on Automobile Insurance. Our intent in the next few pages is to list out and discusses some of the more noble ones as we see it.
Before any discussion of ways to control and reduce personal insurance rates, we must make one definitive statement . . . it would be extremely beneficial for most automobile operators to evaluate the merits of Umbrella Insurance. An Umbrella Insurance Policy covers Liability judgment that exceeds the limits of an Automobile and Homeowner Policy. Typically, an insured would need to carry $300,000 worth of Liability on the basic policies. After that, one can insure up to $1 million or more. Umbrella Insurance is generally priced according to the number of cars one owns. Costs would range from $75 to $200 or more a year.
Umbrella Coverage may defend an individual not only against claims of coverage or personal injury but also against libel, slander, false arrest and invasion of privacy. We believe that this coverage is a "must", especially in today's “lawsuit happy" environment.
Other Ways to Save Money on Auto Insurance
1. Compare Prices - this could be the best way to lower premiums. Some insurers charge up to 50% more than others do. Insurers do not advertise prices, so it does require some work to find a plan that is low cost. No single company always has the best rates. Each prices differently in different places, for different types of insureds. If one finds a company that is substantially cheaper, evaluate the cost savings. Long-term policyholders sometimes get special treatment. If one does switch, do not let the old policy run out until the new one is in force.
11. Pay the premium annually - it costs more to pay in monthly or quarterly installments.
12. Share the car with the teenager in the family - When teens have there owns cars, or drive the family car more than half of the time, they are principal drivers and cost more to insure. They cost less when they are occasional drivers using the family car less than half the time. Be sure to name the teenager as an occasional operator of the least expensive car. If they do own their own car, it would be best to cover them under the family policy; otherwise, they will most likely go into the very costly State High-Risk Pool.
13. Drive safely - Rates will go up if the record shows conviction for drunken driving, chargeable accidents (meaning they are at least partly the insured's fault), or several speeding tickets.
14. Reform - If an insured has had a bad driving record and lands in a High-Risk Pool and is tagged at a higher rate by the insurance company, he/she should work keeping their records squeaky clean.
15. Make all valid claims - Drivers often do not make small claims on their insurance companies for fear of driving up their insurance rates but the claim might not affect the rate. Example: an insured is not normally held responsible for certain ty pse of Physical Damage, a windshield broken by flying gravel, accidents caused by animals, accidents not the insured’s fault, and claims below a certain limit, $300 or $600, even if insured is at fault.
16. Move - Low insurance rates give an insured yet one more reason to avoid big crowded cities. It is possible to save $1,000 or more by living in a small city, a suburb or the country.
20. Travelers - If an insured's policy covers Collision, it would be best to reject the costly Collision-Damage Waiver when renting a car.
What to do if An Accident Does Occur
There are 14 basic rules that all insureds should be aware if an accident occurs. Even though this may be a highly emotional time, it would be best to keep these rules in the glove compartment for convenience.
11. The insured should cooperate with your insurance company, on filling out forms and making reports. It is best if the insured did not make a quick, final statement with their own company or with the other driver's. Injuries that do not seem serious at first may worsen with time.
14. If the accident was serious, the insured should talk to a lawyer about what happened to get a handle on his/her rights and what damages might be.
When to See A Lawyer
It is believed that one of the main reasons for the spiraling rise of insurance rates is due to the aggressive nature of the legal profession is gaining large settlements for their clients. Our purpose in this final section is not to make judgment but guide the reader in when legal counsel could be helpful in an automobile accident situation.
The following claims will be paid immediately without a lawyer's intercession:
A lawyer could be needed in No-Fault States, when the injuries are serious enough to warrant going into court; in Fault States, when the accident is serious. Also, an insured will need an evaluation of the settlement proposed by the insurance company.
The insurance company will defend the insured if sued. If the insured brings the law
suit, he/she will need a lawyer of their own. The attorney chosen should have long experience in trying personal-injury cases. At a first meeting, the lawyer will advise the insured whether the case is worth pursuing. If he/she precedes, the lawyer will receive nothing if he/she loses and a fixed percentage (usually one-third, plus expenses), if the case is won.
Collision claims are negotiated between the insured and the insurance company without legal intercession. A good insurance company inspects the car, gives the insured an estimate and promptly pays its share of the bill.
If the car is totaled or stolen, the insurer is supposed to pay Fair Market Value. If the offer is too low, the insured should get signed statements from auto dealers in the area, attesting to the car's actual value.
If the accident was the other person’s fault, the insured's company will go after his/her insurer and collect the Insured Property Damage claim in full. In that case, the insured will be owed a refund for the deductible and should not forget to ask for it!
Chapter 10 - Review Questions
1. The average cost of car insurance in 1993 was:
A. $ 638
B. $ 500
C. $ 435
D. $1,500
2. What percentage of Americans did Consumer Report find actually shopped for their car insurance:
A. 60%
B. 40%
C. 80%
D. 90%
3. In order to maximize Personal Auto Insurance effectiveness, consumers should depend on insurance companies for:
A. all losses
B. minor losses
C. major losses
D. concurrent losses
4. The most important coverage in an insurance policy is considered:
A. Labor and Towing
B. Medical Payment
C. PIP Coverage
D. Liability Coverage
5. Personal auto insurance would be more inexpensive in:
A. large cities
B. thriving suburbs
C. small towns
D. all of the above
Answers
1. A
2. B
3. C
4. D
5. C