Insurance policy

[Kootenanny]

I didn't want to threadjack the discussion of LadyNinja's injury, but there were some comments on that thread I wanted to ask about.  Ergo, this thread.  From that other thread:

By the description of the injuries, I would expect the insurance policy to need to be at least $250k and maybe $500k to cover the medical costs...

...In the end, the insurance company got a third, the lawyer got a third, and my wife got a third (of a $50k policy).

I was recently told that American insurance policies were often for very low amounts, but..really?  A $50K policy, in this day and age?  Here in BC,  we will often complain about the cost of insurance, but...well, the bare basic minimum liability you can carry is $200K, and as insurance is mandatory, anyone on the road is gonna have at least that (and since "underinsured motorist protection is, like, $12/year extra, it's a no-brainer to have that too, so even if you ARE hit by someone driving without sufficient insurance, or--illegally!--without any insurance, you're still covered).  Many of us here carry several millions worth of liability, as it doesn't really cost that much more than the bare minimum (I carry $5M liability on my car, as it's licensed for business and I need that liability coverage to be allowed on some industrial sites).  I just can't imagine carrying a mere $50K worth of liability--especially in a place as lawsuit-happy as the US--nor can I imagine driving around without underinsured motorist protection.  

So, is this kind of thing common in the States?  I mean, yeah, I wish my insurance premiums were lower, but on the other hand, I kinda like having the peace of mind of carrying lots of insurance and not having to worry too much about losing everything I own because of an auto accident.  Hmmm...

[Justin]

I don't have a lot to add, other than yeah, in most states the required amount is very low here in the US. However it is different in some states. Here is a list.

http://personalinsure.about.com/cs/vehicleratings/a/blautominimum.htm

This is something I was thinking about recently. I personally do not carry very high liability on my policies, and was thinking about that a few weeks ago. I think I'm going to be doubling mine. Does not cost a lot for me, and if I ever did hurt someone, I'd like to know it was covered.

[Biking Sailor]

I carry 100/300/100 K on the vehicles, but also a several million personal liability policy.  That is supposed to pickup where car and homeowners leave off.  Doesn't really cost that much, but really it is for piece of mind (if I ever FU and hurt someone bad, I will feel bad enough without worrying that them and/or I are financially ruined).

[Frankienuckles]

Yep minimum insurance coverage is LOW (20/40) here! In '04 I got side swiped by a distracted welfare wench who borrowed the car that had state minimum on it. I ended up with around $250K in medical bills which my health insurance wasn't gonna cover at first as the accident was clearly the wenches fault. In the end they did cover them after a bit of a fight. So, anyway I still limp and there was no big payday as I was hoping (I got 1/3 of $50k from my policy). There was not really any point in pursuing a lawsuit against the driver (wench) as she didn't have shit, nor did the owner of the car (who happens to be in prison now for life or somthing like it for an unrelated incident) and even if I ever got anything my insurance would have been first in line.

[crewwolfy]

Amrrrrcans don't like being told what to do, or what's 'wise.'  We prefer the government do things and guide us without us knowing it, while we watch American Idol and apply for another credit card..

[Playinthestreet]

Generally speaking, if you carry 100/300/100 liability on your vehicles you can buy a 1M umbrella for a very reasonable amount.  

[BuckeyeRider]

State minimum limits in Ohio are 12,500/25,000/7,500 which is ridiculous.

I carry $500,000 combined single limits primary plus a $1 million umbrella that includes uninsured/underinsured motorists coverage for all vehicles, including the bike.

[zer0netgain]

In the US, each state sets it's own insurance policy standards...although most states have very similar standards.

Buying "state minimum" insurance is the "cheapest" but most companies will sell you better coverage ($100K/$300K) at a greatly discounted rate and it is ultimately a better deal for the insured.  The reason for this is because (as I deal with insurance defense matters), a low-coverage policy means litigation/legal fees to negotiate a settlement that gets the insured off and the insurance company off and then you have UM/UIM (uninsured motorist) coverage kick in where the carrier will hire a lawyer to represent the "accused" because if they are not liable, they don't have to pay.

So, underinsured means....

1.  Inadequate coverage to pay the bills....more legal wrangling/negotiation by the lawyer hired to represent the victim and the lawyer hired to represent the accused and his insurance company.

2.  Invocation of UM/UIM coverage on the victim's policy....victim's insurance company hires legal counsel to represent them so they DO NOT have to pay out.  In short, two lawyers on your policy with one arguing in favor of the guy who injured you.

When there is adequate coverage, it's a simple analysis of liability and damages.  If the coverage is adequate, the company just needs to work out an agreement and issue a check and get releases signed.

Hence, higher coverage = less risk of loss for the insured even though technically they are covering a higher amount of potential liability.

America also has an ass-backward way of insuring drivers.  For example, much of the policy cost is based on the vehicle you drive.  This is flawed because the driver is the cause of accidents, not the vehicle.  Theft, vandalism, etc. maybe the car is more the issue.  Cost to repair, car-related, but liability is also indexed to the vehicle.  If you can place multiple vehicles under one policy, the highest risk/cost vehicle is the basis for everything...even if you hardly drive it.  This promotes people shopping and buying from various carriers for specific vehicles and picking coverage limits based on their perception of how often they drive/ride it and the odds of that being the one they cause an accident in.

If liability coverage (at the least) was based on the actual risk factors of the driver asking for coverage, it would be an improvement and encourage drivers to have more coverage effective on anything they drive.

You also have outside factors like illegal aliens who drive without insurance or with "fake insurance" (there is a whole criminal trade in selling illegals bogus insurance policies because they want to do the right thing but don't know how to tell if a salesman is legit or not).  These people leave insurance carriers paying for many injuries and losses with no real hope of recovery.  The losses are passed onto those who do buy insurance....only driving them to buy cheaper coverage because of the high costs.  More so, high amounts of illegals generally results in more accidents because many of them are poor drivers and will flee the scene of an accident if one happens...risking others in the process.

Every state has laws mandating that MINIMUM coverage must be "affordable" but that is so that you can't price people out of driving by making insurance something available only to the wealthy, but in some areas (heavily urban) insurance costs are insane because of the rate of claims in that area.

[Kootenanny]

Thanks for that post, zer0.  It explains a lot.

America also has an ass-backward way of insuring drivers.  For example, much of the policy cost is based on the vehicle you drive.  This is flawed because the driver is the cause of accidents, not the vehicle.  Theft, vandalism, etc. maybe the car is more the issue.  Cost to repair, car-related, but liability is also indexed to the vehicle.  If you can place multiple vehicles under one policy, the highest risk/cost vehicle is the basis for everything...even if you hardly drive it.  

Ya know, I've often complained about this exact thing.  Insurance is tied to the vehicle here in Canada, too...each vehicle needs a separate policy, when really what should be insured is the driver.

[BuckeyeRider]

Thanks for that post, zer0.  It explains a lot.


Ya know, I've often complained about this exact thing.  Insurance is tied to the vehicle here in Canada, too...each vehicle needs a separate policy, when really what should be insured is the driver.

If we all drove every vehicle the same, I'd buy that argument -- BUT I definitely drive my wife's mini van differently than I drive my turbo charged volvo, and don't get me started about the way I drove my camaro back when I was in high school. The vehicle definitely does have an impact on the liability side of the equation. Maybe not for everyone, but you take your average joe and stick him in a high performance vehicle and he's going to take more risks...

Works that way with bikes too, last I heard...

[Biking Sailor]

Vehicle insurance rates in the U.S. are based on a function of the driver (age, gender, driving history, location, amount/type of use...) and the vehicle you drive (econo box, sports car, SUV, mini van...).

Insurance companies are pretty good at risk analysis, it's their business and they usually make pretty good money at it (stock tip number 2).  

[Desmo Demon]

So, is this kind of thing common in the States?

That was my quote used to start this thread, and to make matters worse for those that are victims of people with bare minimum insurance is that, despite South Carolina having a law that everyone has to carry insurance, it is often reported that about 1/3 of the state's drivers don't even have insurance. Those people know that they don't have anything worth losing, so they simply don't care. There are no debtor's prisons, so everyone seems to think it's no big deal. You wind up with bad credit scores, but most of them have bad credit already. Not to mention you throw in all the people with low incomes or are on welfare, and they know that there are no reprecussions for their actions, so not only do they drive without insurance....and often without licenses....they generally seem to drive like idiots and with cars that aren't even safe to drive.

I try to carry enough insurance to make sure that my retirement portfolio and home are protected from a law suit. I was actually thinking a couple of days ago about bumping up my insurance just to have more peace of mind.

[Kootenanny]

That was my quote used to start this thread, and to make matters worse for those that are victims of people with bare minimum insurance is that, despite South Carolina having a law that everyone has to carry insurance, it is often reported that about 1/3 of the state's drivers don't even have insurance.

Can you get what's referred to here as "underinsured motorist protection," which covers YOU if you're hit by someone carrying insufficient (or zero) insurance?  Here, it's included as a matter of course, and can be bumped up for very little cost (a buck or two per month).  Mind you, the insurance company still goes after the guilty party, but YOU get paid out whether they collect or not...

[Desmo Demon]

Can you get what's referred to here as "underinsured motorist protection," which covers YOU if you're hit by someone carrying insufficient (or zero) insurance?

Yes. We carry both underinsured and uninsured insurance, but only enough to cover our vehicles/property. My medical insurance through work makes it unnecessary to get any additional medical insurance. The policy I have currently pays for 100% of anything that exceeds $27k. That means that after the initial deductible and a period of an 80/20 split on the bill, they will pay for everything above and beyond $27k worth of bills.....but that is only on an annual basis. Recurring medical bills for a permanent disability (such as those from my wife's "accident") often results in a fairly sizeable chunk of out-of-pocket expenses each year, which is one reason why I pump a decent amount of money into an FSA (Flexible Spending Account) that is pre-tax money used for medical expenses. An added bonus is that it helps lower my taxable income each year.  

[cbsnbiker]

I didn't want to threadjack the discussion of LadyNinja's injury, but there were some comments on that thread I wanted to ask about.  Ergo, this thread.  From that other thread:


I was recently told that American insurance policies were often for very low amounts, but..really?  A $50K policy, in this day and age?  Here in BC,  we will often complain about the cost of insurance, but...well, the bare basic minimum liability you can carry is $200K, and as insurance is mandatory, anyone on the road is gonna have at least that (and since "underinsured motorist protection is, like, $12/year extra, it's a no-brainer to have that too, so even if you ARE hit by someone driving without sufficient insurance, or--illegally!--without any insurance, you're still covered).  Many of us here carry several millions worth of liability, as it doesn't really cost that much more than the bare minimum (I carry $5M liability on my car, as it's licensed for business and I need that liability coverage to be allowed on some industrial sites).  I just can't imagine carrying a mere $50K worth of liability--especially in a place as lawsuit-happy as the US--nor can I imagine driving around without underinsured motorist protection.  

So, is this kind of thing common in the States?  I mean, yeah, I wish my insurance premiums were lower, but on the other hand, I kinda like having the peace of mind of carrying lots of insurance and not having to worry too much about losing everything I own because of an auto accident.  Hmmm...

If I'm not mistaken, there are still states that do not require insurance. (They may require a posted bond in lieu of insurance, but that bond is usually ridiculously small.)

[zer0netgain]

There are no debtor's prisons....

YET....  

....there are no reprecussions for their actions, so not only do they drive without insurance....and often without licenses....they generally seem to drive like idiots and with cars that aren't even safe to drive.

Well, I live in Virginia which allows you to not have insurance, but you must post a $500 bond every year (non-refundable).  It does not absolve you from financial responsibility for any accidents you are at fault for.

If you cause harm to another as an uninsured motorist, the judgment against you will be filed with the DMV, which will result in your license being revoked until the debt is paid in full.  Some might not care, but our office used to handle subrogation cases for a few insurance companies, and for a few years we had people seek us out because the lawyer handled the case and they needed to pay off the debt in order to get their drivers license reinstated.

If a case sits too long, there is the danger of the file being destroyed (old firms don't save files when they close the doors or if a file goes inactive long enough it might be moved to closed and eventually destroyed).  Then proving the debt is paid is all the more difficult.

We've set up payment plans, only to have the payments stop in a couple months.  So, we have to contact the DMV and yank their license all over again.  After that, it stays revoked until every penny is paid.

[Kootenanny]

If you cause harm to another as an uninsured motorist, the judgment against you will be filed with the DMV, which will result in your license being revoked until the debt is paid in full.  

How nice...you get the chance to drive around until you hit someone, then when you can't pay for their medical or replace their vehicle, your license is revoked...

It might seem a bit "big brother" to some, but I prefer making sure that a person CAN pay for any damages (ie, carries insurance) before letting them drive.  It's kinda like wearing a helmet...you really hope you never need it, but if you do, it's invaluable.

[zer0netgain]

How nice...you get the chance to drive around until you hit someone, then when you can't pay for their medical or replace their vehicle, your license is revoked...

It might seem a bit "big brother" to some, but I prefer making sure that a person CAN pay for any damages (ie, carries insurance) before letting them drive.  It's kinda like wearing a helmet...you really hope you never need it, but if you do, it's invaluable.

Well, this is probably the practice in most states.  In Virginia, you have the legal right to "self-insure" and the $500 annual bond is what you put up to exercise that right.  Perhaps the law should be changed so that if you "self-insure" you must pay the bond and submit documentation proving that X amount (say $100K) is in a secured account in case you have a claim.  This way you can not pay insurance, let the money work for you (it can earn interest), but if you have an accident and are at fault, you have at least $100K to pay damages...which is in excess of state minimum requirements.

[Kootenanny]

Well, this is probably the practice in most states.  In Virginia, you have the legal right to "self-insure" and the $500 annual bond is what you put up to exercise that right.  Perhaps the law should be changed so that if you "self-insure" you must pay the bond and submit documentation proving that X amount (say $100K) is in a secured account in case you have a claim.  This way you can not pay insurance, let the money work for you (it can earn interest), but if you have an accident and are at fault, you have at least $100K to pay damages...which is in excess of state minimum requirements.

That makes sense...until, of course, you're sued for MORE than $100K (which must happen in vehicle accidents in the States--we're always hearing horror stories about the cost of medical treatment there...).

Of course, you suggest that as is, there is no legal requirement for a person to carry ANY money in case of accident--which means, any person they do injure will be SOL, as in "you can't get blood from a stone."

[zer0netgain]

That makes sense...until, of course, you're sued for MORE than $100K (which must happen in vehicle accidents in the States--we're always hearing horror stories about the cost of medical treatment there...).

Of course, you suggest that as is, there is no legal requirement for a person to carry ANY money in case of accident--which means, any person they do injure will be SOL, as in "you can't get blood from a stone."

Well, the right to "self insure" is practiced all over the US in many industries.  It is simply easier to pay the damages when it happens than the insane overall premiums for a 1-year or 6-month automatic renewal policy.

As people who have minimal insurance often get off with a "max limit" payout and a release of all claims as a result, I'd say the blood from a stone analogy kicks in no matter what your coverage is.  Insurance companies can have a hard time backing out of defending an insured in order to get out of a case.  For those who are self-insured at $100K, I'd say "take the money and run" could be just as legitimate.  After all, most insurance cases end with an out-of-court settlement.  Litigation is just more money and no guarantee that anyone will get all that they are asking for.