July 26, 2018


Sorry to start with a disclosure, but insurance coverage is a detailed topic, and this is not meant to be comprehensive; rather it is just a brief (quickie) primer. Please contact an insurance agent for the correct type of coverage for you or your household.

Most clients who come to see me have little to no idea what type of insurance coverage they carry on their car or home, or how it works. This is important information to know because if the at-fault driver’s insurance is going to pay anything at all, they are usually only going to do it in one lump sum down the road when the case is ready to settle (or won at trial). In the meantime, the injured person is forced to flounder on their own and obtain and pay for medical treatment or other needed things (and often the attorney has resources that can help find treatment or other needed items) necessitated because they have been injured.

If my clients come to me with health insurance or medical payment coverage on their car insurance policy, it makes my job a little easier than when I am representing a client who does not have health insurance or medical payments coverage.

The other important insurance point is that every responsible person who can afford insurance wants to be adequately insured; because if you are running around with inadequate insurance and (God forbid) cause a wreck, you could lose a lot.

I am often asked how much insurance somebody should carry? The basic rule is to buy as much as you can afford (I will not give that cop-out answer. Some guidance will be provided below).

The minimum amount of car insurance that can be purchased in California is $15,000, which usually looks like this on your insurance declaration sheet: 15/30/5. The first smaller number ($15,000) is the most that will be paid to any one person (no matter how badly they are hurt or how much their case is worth) and the second larger number ($30,000 in this case) is the most that will be paid for any one accident or occurrence; and the last number would be the property damage coverage.

An example of how this works is as follows. When a motorist is injured by the fault of another driver who is insured with only 15/30/5, and (for example) sustained $20,000 in medical bills, $5,000 in wage loss, and $7,500 in damage to their car, the most they could get from the at-fault driver’s insurance company would be $15,000 for the injury case (medical bills, wage loss, and pain and suffering), and the most they could get for the property damage to the car would be $5,000. (Bodily injury claims and property damage claims are usually split up and handled separately).

Many people complain that this is an unfair situation. I agree that it is; but insurance is expensive, and many people are doing the best they can to comply with the law and carry insurance, and the State of California has decided that 15/30/5 is okay to carry.

How do you protect yourself from being injured by somebody else who has little or no insurance when driving? Carry ample amounts of uninsured or underinsured motorist coverage on your car policy. On your insurance declaration sheet this is often shown as UM/UIM 100/300. (If you are injured by an uninsured or under-insured motorist, please contact the office if you need help opening and handling the claim).

Let’s take one more example. A careless motorist is carrying a 15/30/5 policy. The careless motorist rear-ends another car with three occupants. Two of the occupants of the car that was rear-ended are badly injured, and one has very minor injuries. The most that the at-fault parties insurance will pay is a total of $30,000, and the most that they would pay to any one person injured is $15,000; so in this example the three persons would have to split $30,000 (with none of the three getting more than $15,000). In this example, hopefully the two seriously injured persons are carrying adequate under-insured motorist coverage (and if they are, once the policy limits have been paid by the at-fault driver’s insurance policy, then an under-insured motorist claim can be opened). (I know this gets a little confusing).

Home-owners insurance works in a similar manner but is often listed as a single limit of coverage (e.g. $300,000 for liability).

For your automobile coverage there are many add-ons available. You can add medical payments coverage, rental car coverage, towing, etc. All of this is great, but it adds costs to your monthly bill. Medical payments coverage is nice to have. It covers you or any person injured in your car up to the amount purchased for medical treatment related to the injury. It does not raise your rates to use this coverage unless you are at-fault (If your car slides on black-ice and crashes, and you go to the ER, you can use the medical payments coverage to pay for it (but your rates could go up). If medical payments coverage pays any of your bills in a personal injury case, and you later get a settlement (or win at trial), then some or all of the medical payments will be paid back to your car insurance.

How much insurance coverage should you carry?

Again, you have to rely on an agent for this, but here are some general guidelines. When deciding what insurance coverage to purchase, you have to look at your budget, and also what you have to lose? For example, if you are a single college student with no kids, no home, and very little income (This was my situation in college), or are struggling to put food on the table, the very fact that you are complying with the law by carrying any insurance, even 15/30/5, is commendable and you are doing the right thing.

On the other hand, if you own a home, have a good paying job, and have things to lose, you need to carefully consider how much insurance to carry. For somebody in this category, the minimum you should consider is 100/300. (And that is arguably not enough). People are often shocked at how inexpensive it can be to raise their coverage limits. Sometimes the difference between 50/100 and 100/300 is only a few dollars extra per month.

For anybody established in life (you have assets that could be lost), an umbrella policy is mandatory. An umbrella policy means that you have car insurance and homeowners insurance, and the umbrella goes over both of them to provide extra coverage protection (like an umbrella keeping the rain away from your car and your home).

Many umbrella policies require you to carry a minimum amount of underlying insurance. For example, 300/500 on your auto policy, and 300 on your home. The umbrella coverage is often 1 million or more. If a person caused a car crash and got sued for $500,000, then they would have protection from their car insurance up to $300,000, and then the umbrella policy would provide additional protection above and beyond $300,000, up to the amount of insurance purchased (in this example the additional $200,000 would be paid out by the umbrella policy). Umbrella policies often cost as little as $125.00 per year.

Insurance is serious business. It is another bill that we all dread paying, because it can be expensive, and we hope we never need it; but if something happens, you will be very thankful that you purchased the right coverage beforehand. A good insurance agent can explain all of this further and help you pick out the best coverage for you.

Final note for my motorcycle clients:

I often see agents selling motorcycle policies that provide great coverage if the bike is damaged, but little to no uninsured/under-insured motorist coverage. I cannot prove it, but I think agents are discouraged from selling this coverage to riders, because when a motorcycle rider is injured, the injuries are often serious, and hence the claim payout on an uninsured motorist claim expensive. I think it is worth spending the extra money to make sure you have adequate uninsured/under-insured motorist coverage on all insurance policies, including motorcycle policies.

Please be safe out there.


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