In a previous blog, I talked about important factors we consider in evaluating a case. One of the keys is insurance. Today I focus on two common types insurance coverage available under your personal auto insurance policy - how they are different, and how they protect you and your family.
You can watch a short video on this topic
Let's start with dismissing one common misconception. There is no such thing as full coverage. I often meet with people who tell me they have full coverage. Unfortunately, that is not a thing. We buy specific benefits and protections from our insurance company, and there many different combinations you can select. It's best that you work with your agent to understand your personal situation and what protections you need to take care of your family and assets. In the end, that is what insurance is - protection for the people and and possessions we care about.
When it comes to auto insurance, the starting point is liability coverage. Liability coverage protects you from claims brought by another person. Going back to the simplest example, let's say you inadvertently drive through a red light and cause a crash. Your liability coverage will protect you if the people you hit bring a claim.
Liability insurance is required by state law. Today the mandatory minimum is $15,000. That number has not changed in over 40 years, but in July 2020, the mandatory minimum coverage is increasing to $25,000.
There is one other wrinkle, personal auto liability coverage is usually sold with a per person/per occurrence limit. Look at your declarations sheet, or dec sheet, which is the summary of your coverages. You will see your limits listed as $50,000/$100,000 or $100,000/$300,000 or $15,000/$30,000, whatever limits you have purchased. What this means is that in any single occurrence, the per person limit is $50,000 and regardless of how many people make claims, the per occurrence limit is $100,000. Keep in mind, no one person can recover more than the per person limit.
So what happens if you are the victim of a negligent driver who doesn't have enough liability insurance? That is where underinsured motorist coverage comes in. This benefit is something you buy to protect yourself from other people. It is abbreviated in your policy as UIM coverage. It's companion is UM, uninsured coverage, which kicks in when a wholly uninsured driver causes a crash.
UM or UIM coverage is optional, but Arizona law requires that your insurance company offer it to you and requires it document your decision to reject the coverage.
This projection steps into the shoes of the at fault driver, when they have inadequate insurance or no insurance at all. In my view, it is the best, most efficient insurance you can buy. The premiums are relatively low and the benefit - especially in a state with lots of uninsured and underinsured drivers -- it is a smart way to protect yourself and your family. My recommendation - buy as much um/uim coverage as your policy allows.