3 questions you need to ask about your car and homeowners insurance

I’m not intending to make more money for your insurance agent, but I hope by the end of this post you decide to pick up the phone or email your insurance agent to learn more about your insurance coverage.  You may learn that you do not have enough insurance to protect you if you get sued or enough insurance coverage if you are hit by another individual.

I represent individuals who get injured in car crashes, or injured on a landlord’s property, or at commercial properties.  Too often there is not enough insurance coverage to cover the injuries, medical bills, lost wages, and pain and suffering.  I have had many cases where there is $50,000 or $100,000 of insurance coverage, but my client’s medical bills alone exceed the limits of insurance coverage.  How and why does this happen?  Unfortunately, it happens because too many people don’t know what kind or how much insurance they have until they have been in an accident.

1. How much insurance coverage do I have?

I will often ask my personal friends how much car insurance coverage they have and this is the typical conversation:

Me: How much car insurance do you have?

Friend: Full coverage.

Me:  That really doesn’t tell me anything, how much coverage do you have if you cause an accident?

Friend:  Full coverage.

Me:  Ok, that’s not what I’m asking, do you have $25,000.00, $100,000.00, $500,000.00?

Friend:  I don’t know.

My advice to them is to talk to their insurance agent and ask how much coverage they have on their vehicles.

The State of Indiana requires drivers to carry a minimum of $25,000 of liability insurance coverage on their vehicle.  Unfortunately, we know thousands of drivers are on the roads without any insurance.  Additionally, $25,000 is woefully inadequate in a crash with even moderate injuries.

If you have a family, if you own a house, if you have a savings account, I would encourage you to increase your liability coverage to the highest amount that you can comfortably afford.  You may be surprised that you can increase your liability limits substantially for only a few dollars each month.

Typical insurance policies may have a $25,000/$50,000, $50,000/$100,000, $100,000/$300,000, or $250,000/$500,000 policy limit.  Further down in this post you can also read about umbrella policies.  What does that mean when the policy limit is $100,000/$300,000?  It means that your insurance will pay out up to $100,000 in liability coverage per person or up to $300,000 per accident.  For example, if one person was injured in a crash they could recover up to $100,000.  But, if four people were injured they could only collectively recover up to $300,000.

So what should you do next?  Ask your insurance agent how much liability coverage you have per person and per accident.

2. What happens if I’m hit by a person without insurance or not enough insurance?

This is why you need to ask how much uninsured or underinsured motorist coverage you have if someone injuries you and they don’t have insurance or not enough insurance.  Uninsured motorist coverage, often referred to as UM coverage, applies when a person without insurance hits you.  Underinsured motorist coverage, often referred to as UIM coverage, applies when a person hits you and they have less insurance coverage than the limits of your underinsured coverage.

Uninsured or underinsured insurance coverage can pay your medical bills, lost wages, pain and suffering, and any other damages you may have suffered as a result of another person hitting you.

For example, if a person crashes into your car and only has $25,000 of insurance coverage and you have $100,000 of underinsured coverage, you would an additional $75,000 of coverage through your underinsured coverage after the other driver’s insurance coverage pays its policy limit.

Frankly, and selfishly, you should care as much, if not more, about how much uninsured or underinsured insurance coverage you have because it is the insurance coverage that will take care of you if you are injured by a person who doesn’t follow the law or only keeps state minimum coverage.

A few years ago, a person contacted me after he was involved in a crash as an innocent passenger in a vehicle.  Unfortunately, the individual who drove the car that crossed the center line and crashed into the vehicle he was riding in did not have insurance.  Additionally, the person driving the vehicle he was riding in did not have coverage either.  The person had bad injuries, multiple surgeries, and no way to pay his medical bills or recover his lost wages.  Don’t let this happen to you, ask your insurance agent, how much uninsured and underinsured coverage do I have?

3. What is umbrella coverage?

Even if you don’t have umbrella coverage, you may have heard people use the term umbrella coverage.  For lack of a better term, umbrella coverage is an additional layer of insurance coverage on top of your homeowners or automobile policy.  Additionally, umbrella policies can also cover other unique situations like a boat or even slanderous social media postings.  I encourage you to talk to your insurance agent about these types of coverage to see if it applies to your situation.

Frequently, insurance companies sell $1,000,000 or $5,000,000 umbrella coverage.  You may be surprised how inexpensive it can be to add a $1,000,000 umbrella to your existing insurance coverage.  I have seen $1,000,000 umbrella policies as low as $175 a year.  Typically, these policies will range from $200-$400 a year, for another $1,000,000 of insurance coverage!  That is a lot of additional coverage for not a lot of money.

But Nick, do I need another $1,000,000 of coverage, I have a normal job, a normal family, a normal house, it seems excessive.  Imagine the worst case scenario, which I see too often in my job, imagine being hit by a drunk driver or a texting driver and suffering life changing injuries.  You are no longer able to work in your job so you can’t provide for your family and you have large medical bills.  If you have uninsured or underinsured umbrella coverage, and most umbrella policies have UM and UIM coverage, this coverage can provide up to an additional $1,000,000 for you and your family.  This type of coverage would provide financial protection to your family if you can never return to your job.  Additionally, if you or your spouse were killed in the same situation, the umbrella coverage would essentially serve as another form of life insurance.

I can’t tell you what to do, but I really encourage you to find out how much and what types of insurance coverage you have to protect you and your family.

Nick Otis is a partner at Newby Lewis Kaminski & Jones, LLP.  In 2015, 2016, and 2017, Nick has been recognized as a Rising Star in personal injury litigation by Super Lawyers.