If you are involved in a serious motor-vehicle accident that is not your fault, and there is inadequate liability coverage for the at-fault driver, the adverse economic effect on you can be significant.
Most of us think defensively about whether or not we have adequate liability-insurance coverage. But the larger risk for responsible drivers may be that an irresponsible driver with inadequate insurance harms us and leaves us exposed financially.
We can protect ourselves from liability exposure by being careful and prudent drivers, and by carrying higher levels of liability insurance.
There is little we can do to protect ourselves from irresponsible drivers negligently causing us harm. However, we can limit significantly the adverse economic effect caused by that negligence.
Consider this situation: you are in a wreck that is not your fault. In addition to medical bills, which your health-insurance carrier may pay, you are out of work for several days and even weeks. The negligent party has no insurance, or more than likely, the minimum coverage of $30,000 per person per accident.
Your economic loss for being out of work, not even considering your other compensable damages (pain and suffering and permanent injuries) is going to be significantly greater than $30,000. The negligent party's other assets are rarely adequate to compensate you fully for your loss.
This risk of economic loss is particularly dangerous for higher-income earners. If you have higher living expenses, including a large mortgage, many families are thrown into temporary economic turmoil.
Changes in state insurance laws have made it easier and more affordable for families to protect themselves against these kinds of potential losses.
By the numbers
Here's how it works: The minimum limits for liability insurance a vehicle owner must carry is $30,000 per person and $60,000 per accident.
Many of us carry higher limits, but statistics show that many more of us carry the absolute minimum limits.
Under the previous law, a vehicle owner who bought higher liability limits had the right to reject the extra coverage for the same uninsurance/underinsurance limits. Often, owners would make an uninformed decision, not fully recognizing the risks of their decision.
The cost of that extra coverage was a few dollars, but the financial risk by failing to have that coverage was significant.
For example, let's say you had liability coverage, and underinsurance coverage, of $100,000 per person per accident. If you had a loss of $75,000, and the negligent party had the minimum coverage of $30,000, your own underinsurance carrier would "stand in the shoes" of the negligent party for the other $45,000 of the claim ($75,000 claim, less the $30,000 coverage paid by the negligent party's insurance carrier).
With underinsurance coverage of $100,000, therefore, you were fully compensated for your loss.
If you rejected that extra uninsurance/underinsurance coverage, you and your family would be exposed. Your loss, over the $30,000 of coverage paid by the negligent party's carrier, would be $45,000.
Under the new law, if you purchase higher liability limits over the minimum coverage, your carrier is required to provide uninsurance/underinsurance coverage in the same amounts. You cannot opt out of this inexpensive but very important coverage.
Another helpful change in the law allows an owner to purchase uninsurance/underinsurance coverage that is greater than your liability coverage. This extra insurance is highly affordable.
The new law went into effect regarding policies issued or renewed after Jan. 1, 2009. Your carrier is required to give you notice of your expanded elective options. You should contact your carrier now and inquire about those options.
Remember: An informed choice is a smart choice.
■ Mike Wells is an attorney with Wells Jenkins Lucas & Jenkins, PLLC, in Winston-Salem.
Email
Facebook
Google
Twitter
Favorites
More
Advertisement