The "Full Coverage" Myth

I hear it all of time, “I have full coverage on my car!”  Then I look at the declarations page and many insurance provisions were rejected or missing, causing the client to potentially be out of pocket for someone else’s negligence. In Oklahoma, the state minimum liability policy to own a vehicle is $25,000/$50,000 limits, in which I will explain the numbers below.  The state minimum limit is low, and lucky if the negligent vehicle even carries the coverage. I tell all of my clients that 3 out of every 4 drivers in Oklahoma most likely have minimum coverage or no coverage at all. I always stress the importance of protecting yourself, starting with adding certain coverage to your automobile insurance policy.  

There are many more avenues, nuances, and case law explaining auto coverage. However, the purpose of this article is to explain basics of your auto coverage. Let’s dig in…

Your automobile insurance company will send you a “Declarations Page” each time your policy is to renew. If you cannot locate it online (or in your glove box if you are like me), contact your insurance agent and request your “Dec Page.”  

Part 1, Liability Coverage:

The first item listed on the Dec Page is your liability coverage. Liability coverage applies if you are at fault in an auto collision (legalese: you are negligent when operating your vehicle), which this coverage pays for the other injured party’s damages. This coverage essentially protects your assets.  If you have many assets, then I would recommend you have high liability limits. THIS COVERAGE DOES NOT PAY FOR YOUR OWN DAMAGES.    

Let’s look at an example. The numbers below are often referred to as a 250/500/100 policy.  

The first number (250) represents the bodily injury limits for one person that is injured in the wreck as a result of your negligence.

The second number (500) represents the total coverage available for all injured persons in a wreck as a result of your negligence. If 3 people suffer bodily injuries from your negligence, there is $500,000 in total coverage available under this policy, split 3 ways, with $250,000 max payable to one-person.

The third number (100) represents the total coverage available for any property damage in a wreck as a result of your negligence. Property damage can be related to the other person(s) vehicle(s), landscape, walls, mailboxes… I’ve even seen entire buildings damaged in a wreck.

Part 2, Medical Payment Coverage:

In Oklahoma, Medical payment coverage, often referred to “med-pay” for short, is a no-fault “health insurance” policy that is built into your auto policy. This policy covers medical expenses only. The coverage is usually sold as $1,000, $5,000, $10,000, $25,000, or $50,000 coverage. If you are injured in a wreck, whether it be your fault or the fault of someone else, the med-pay coverage will pay for medical bills associated with your injuries from the wreck, up to the policy limits. So if you have $50,000 med-pay limits, you are at fault in a wreck, and have $75,000 in medical bills, your med-pay policy could pay the $50,000 limits to cover your medical expenses.

It is important to read your policy, as some policies state they will only pay for “reasonable” medical expenses – meaning the insurance company will reduce a medical bill to escape paying the full limits.

Part 3, Comprehensive Coverage:

In Oklahoma, Comprehensive Coverage applies to theft, wind, hail, etc. that occurs to your vehicle. Your policy will outline exactly what it pays for. Your policy may or may not pay for contents (property inside your vehicle such as golf clubs, sunglasses, computer, etc.), which might overlap with your homeowner’s insurance policy. In the example below, the deductible that you would pay is $100, and the insurance company will pay for the rest of the damage to your vehicle.

Part 4: Collision Coverage:

In Oklahoma, Collision Coverage applies to your vehicle’s damage as a result of your negligence or someone else’s negligence. If you took a bank loan to purchase the vehicle, the bank will most likely require this coverage to protect the asset. In the example below, the deductible that you would pay is $500, and the insurance company will pay for the rest of the damage to your vehicle.

I get this all the time, “don’t use my insurance because I don’t want my rates to increase” or “don’t use my insurance because I wasn’t at fault.” I tell my clients with collision coverage “you paid for the coverage so might as well use it.” In Oklahoma, the insurance company cannot raise your rates for using purchased coverage if you are not at fault in a wreck (explained more in another article). If you are not at fault, and your insurance company pays for your property damage under your collision coverage, your insurance company will get their money back from the at-fault party’s insurance company, and reimburse you for your deductible.

This coverage is extremely important if the at-fault party does not carry insurance, which happens more often than not unfortunately.

Part 5, Underinsured/Uninsured Coverage:

In Oklahoma, Underinsured/Uninsured Coverage, often referred to as “UM” or “UIM,” will pay for your bodily injuries sustained in a wreck that is not your fault, and the at-fault party does not have enough coverage to pay for your injuries. UM differs from med-pay in that UM will pay for medical expenses, pain and suffering, and lost wages. Under Oklahoma law, your UM policy must evaluate your claim in a reasonable and timely manner. If not, we call that “bad faith” in the legal world.

In the example policy below, the UM coverage is 250/500. The first number (250) represents the available dollar amount for one person’s bodily injury damages. The second number (500) represents the available dollar amount for bodily injury sustained to everyone in your vehicle. For example, if you are driving your vehicle, and you have your spouse and child in the car during a wreck that is not your fault, there will be $500,000 available in UM coverage should you need it, split three ways.

In today’s world, UM coverage is very important to carry – to protect yourself and your family.

Part 6, Other Coverage:

Other coverage available to purchase usually include rental reimbursement (if your vehicle is getting repaired under your comprehensive or collision coverage, then a rental will be provided up to a certain dollar amount), death indemnity, and umbrella coverage (protects you from the “storm” – if you are at fault and the injured person’s injuries exceed your liability limits, then the umbrella “kicks in” and protects you and your assets).

Conclusion:

Bottom line, medical costs are expensive and on the rise. Medical providers do not have to bill your health insurance. There is no law requiring them to do so. Therefore, it is extremely important to protect yourself and your family from the negligence of others by purchasing the proper coverage.

If you have questions, feel free to contact me.