Focused on Risk

If you or your family member is injured in an accident for which someone else is responsible, how will your medical and other expenses be paid?

I am reminded of a friend, Susan, who was recently involved in a serious car accident that was the fault the other driver.   Susan was injured and incurred major medical costs which exceeded the insurance limits of the other driver, who carried the minimum mandated liability coverage.  Susan was faced with ongoing medical expenses that amounted to hundreds of dollars out of pocket each month, even after the at-fault driver’s limits were exhausted.  Susan contacted an attorney for advice on legal action, but was told that it was unlikely that she would ever be able to receive any meaningful settlement from a driver without significant net worth outside the insurance policy limits.   Susan filed claims with her health insurance provider, but the co-pays and non-covered expenses were putting a huge strain on her family budget.  She found out quickly that health insurance doesn’t pay for lost wages or pain and suffering.  Susan was soon facing bankruptcy as a result of the medical bills  – all caused by the negligence of a judgment-proof errant driver.

What can you do?

In most states, the minimum bodily injury liability coverage is around $25,000 per person.  In some states, it can be low as $10,000 per person.  Insurance industry observers estimate that as many as 65% of drivers carry minimum limits or have no liability coverage at all.  If you are involved in an accident with someone carrying state minimum coverage, their insurance will most likely not be enough to fully pay for your ambulance transport and initial visit to the ER.  Even non-life threatening injuries can generate tens or hundreds of thousands of dollars in expenses that will be borne by YOU!

To protect yourself from this scenario, consider adding a coverage called  Uninsured/Underinsured Umbrella Liability to your personal umbrella policy. This coverage is extremely inexpensive and will provide coverage to you for lost wages and pain and suffering, as well as medical expenses that are beyond the limits of the at-fault driver’s available coverage.

Take the time to put together a complete insurance plan that will protect you and your family, should the unexpected happen.  Don’t cut corners to save a few bucks and don’t settle for “good enough” and end up unprepared like Susan did.

Next week, we will turn this issue around and look at what you should think about when setting your personal automobile liability coverage  limits.