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Automobile Insurance Recommendations by Peter Burnett

January 2009

Car insurance is something that we all have but we seldom think about. To know if your insurance is right for you and your family, please read Burnett & Williams insurance letter. We make sure all of our clients receive this important information. It is helpful to know exactly what insurance is and the different types and limits that you should carry.

Several years ago I made a New Year’s resolution to inform friends and clients about automobile insurance. In my 30 years of practice as a personal injury lawyer, I have represented far too many clients in cases where available insurance coverage was woefully inadequate to cover the damages incurred. That prompted the following letter and a goal of 1,000 recipients by the end of that year. I achieved my goal, and the positive responses from many recipients have inspired me to continue sending the letter to anyone that might benefit from its contents.

It is my hope that you and your loved ones will be adequately covered should you ever be in an accident. For only a slight increase in insurance premium cost, most of my former clients that got short changed could have been fully compensated. All of them told me they did not fully understand what coverage they bought and why. I am sorry to say that some insurance agents do not adequately explain what they are selling and, as agents of the company, may not encourage or recommend coverage that you should have.

Part of the problem is the current level of mandatory minimum liability limits. In Virginia, an automobile must have coverage in the minimum amount of $25,000 per person and $50,000 per accident for bodily injury and $10,000 for property damage liability coverage. These limits have not changed since 1976. Had the limits increased to keep up with inflation over the years, equivalent coverage would be $85,000 per person and $170,000 per accident in today’s dollars. This equivalent coverage amount is based on general cost of living inflation since 1976. Inflation of medical costs increased at about twice the rate of the general cost of living during the same period. As medical expenses are a major component of almost every personal injury claim, even more coverage is needed to keep up with inflation in that sector.

Interestingly, the insurance industry OPPOSES increasing mandatory minimum limits. This is so because most of the annual premiums they collect are for the minimum level coverage. Higher coverage levels do not generate that much more income for the insurance companies, but they do expose them to higher potential payments for damages.

There are six basic categories of automobile insurance coverage:

Liability

As the name suggests, this coverage pays damages to injured persons when the accident is your fault. The insurance carrier is required to do two things for you: hire a lawyer to represent you if necessary and pay up to the policy limit either in settlement or as a result of verdict at trial. Because you are personally responsible for the payment of any judgement in excess of your liability coverage limits, you should buy coverage with limits that are high enough to cover claims arising from a serious accident. It is usually sold with two coverage limits for an accident: per person and per accident. It is also sold in a form called single limit coverage, which I believe is a far better bargain.

Collision

This coverage pays for the damage to your car when the accident is your fault. Premiums are based on the value of your car, the cost of repairing that particular make and model, and your driving record. If your vehicle is financed, the bank will almost always require collision coverage.

Comprehensive

This coverage pays for theft, vandalism, and other damage that your car may sustain as a result of fire, hailstorms and other natural disasters. It too is usually required by any lender that finances the purchase of your car.

Medical Payments

This is optional coverage that all insurers in Virginia are required to offer. It covers the usual and customary cost of all accident related medical treatment for any occupant of the car injured in an accident for a period of three years after the date of the accident. It is paid up to the coverage amount without regard to who was at fault and without regard to any health insurance or other coverage you may have. It can be purchased in varying amounts. Most folks have coverage between $2,000 and $5,000.

Uninsured / Underinsured Motorist (UIM)

This coverage is mandatory in Virginia and every insurance company is required by law to offer it to you in amounts equal to your liability coverage. It covers you in the event the person at fault has no insurance (uninsured coverage) or does not have enough insurance to cover your damages (underinsured coverage). You can appreciate how important this coverage is when you consider the number of people who are carrying only minimum limit coverage or, worse, are driving on our highways with no coverage at all.

Umbrella

As the name suggests, this coverage is in addition to your other coverages and is

only used when they have been exhausted. It is surprisingly inexpensive and provides protection for automobile liability claims as well as other non-automobile related claims. One drawback of umbrella coverage is that it typically does not provide additional Uninsured/Underinsured coverage.

If you have read this far, you are probably wondering what you should do. Here is what I recommend. Review your policy for each of the above coverages. Many people have $100,000/$300,000 bodily injury liability coverage and the same amount of Uninsured / Underinsured (UIM) coverage. This level of coverage is adequate for most small and medium claims, but for a few more dollars you can dramatically increase your protection against liability and against your not being compensated for life altering injuries if you are injured by a driver with inadequate coverage. Ask your agent to give you a quote on single limit coverage. This coverage eliminates the per person per accident distinction. For someone with a 100/300 policy the per person coverage is tripled from $100,000 to $300,000. The same single limit also applies to the UIM coverage. If you are seriously injured by a driver with no coverage or minimum coverage, you will have your own policy coverage to pay up to the $300,000. That may sound like a lot of money, but stop for a moment and ask yourself how you would make it if you were seriously injured and out of work for six months or a year. Would a policy limit payment of $25,000 be satisfactory? Even $100,000 probably would not be adequate. A very few additional dollars could change that and provide peace of mind. If you want maximum protection against liability claims, consider a $1,000,000 or greater umbrella. Because most umbrella policies do not provide UIM coverage, you will need to increase your level of liability and UIM coverage to get maximum protection for yourself against underinsured and uninsured motorists. For most drivers, that costs about $200 to $300 per year.

Until recently, I carried $500,000 single limit liability and UIM coverage along with $5,000 medical payments coverage. With four vehicles covered and three drivers in my family (one a teenager) my annual premium was about $3,000. If I were to have been seriously injured by a driver with a 25/50 policy, I had an additional $475,000 available to cover the loss. Last year I decided to increase my coverage to $1,000,000 single limit. I was pleased to find that my premium rose by only $20.00 per vehicle per year.

No letter from a lawyer would be complete without disclaimers. The above information is not intended to be legal advice. I am not selling anything. I am a personal injury lawyer, not an insurance agent. The only way your buying higher coverage limits might benefit me would be through your getting hurt and becoming my client. We both hope that will not happen.

Should you have questions or concerns about the information I have provided, please feel free to call me or send an e-mail to peterb@burnettwilliams.com. Likewise, if you would like to discuss any personal injury matter, I would be delighted to talk with you. Please call me at 703-777-1650.