When you’ve been in an accident, you need to know the basics of how insurance works. Both your insurance and the insurance of theother driver in the accident.
Although there are variations based on the insurance law in each state, there are certain basic categories of coverages in a typical automobile insurance policy (your state may have additional types of coverages as well that may not be listed here). These types of coverages commonly include general liability coverage (bodily injury and property damage), uninsured motorist coverage, underinsured motorist coverage, comprehensive coverage, collision coverage and med-pay/ PIP coverage.
General Liability Coverage
This type of coverage provides coverage to you, the policyholder, someone driving your car with permission (in a state where the insurance follows the car) and anyone else who is an insured under the terms of your policy for liability to others caused by negligently driving your car. (And, sometimes, it may cover you while driving someone else’s car).
General liability coverage includes coverage for bodily injury liability (injuries caused to others in an accident that is your fault) and coverage for property damage liability (damages caused to another person’s car or other property damaged in an accident that is your fault). This coverage only applies if you or someone else covered by your policy is at fault for an accident. Also, it is important to realize that this particular coverage only pays others that are harmed by you or another insured under your policy.
If someone else is at fault and hurts you, their general liability policy pays for your damages and if they do not have insurance or enough insurance, your uninsured or underinsured coverage, if you have it, pays for your additional damages. Again, your liability policy does not pay you only others to whom you or another insured under your policy negligently cause damages.
Uninsured Motorist Coverage
Put simply, this is coverage that you can buy that pays you if someone else injures you, they are at fault and they have NO insurance. Believe it or not, despite being required by law in almost every state, some people drive cars without any insurance at all and sometimes they cause accidents. In that case, if you have uninsured motorist coverage, it will pay you, up to your uninsured coverage limits, for your medical bills, lost wages, pain and suffering, property damage and the like.
If the defendant was uninsured or underinsured, your state law will probably provide that you have to serve the complaint on your own insurance company so that they are aware that they may have to potentially pay an uninsured or underinsured motorist coverage claim. Also, if the defendant is uninsured, he or she might not have an personal injury attorney or otherwise answer the complaint. In that case your insurance company will probably hire an personal injury attorney to represent the defendant.
Thus, the law may require you to officially put your insurance company on notice of the lawsuit by serving them with the complaint so that they can take the necessary steps to protect their interests. In this situation, in a sense, your own insurance company becomes your adversary. That is why you should only give them an interview in the beginning of your claim with your personal injury attorney present.
This is coverage that you can buy that pays you if someone else injures you, they are at fault and they do not have enough insurance topay the full amount of your claim.
For example: John Smith causes an automobile accident and you are injured. You have $15,000 in medical expenses and your pain and suffering is worth, say, another $15,000. Your total bodily injury claim is thus worth $30,000. Suppose further that John Smith only has $20,000 in insurance coverage. In that case, John Smith’s insurance company would pay you $20,000 and your insurance company would pay you $10,000 from your underinsured motorist coverage, assuming you have purchased it and your limits are at least $10,000 (the difference between your claim and John Smith’s policy limits).
Also, underinsured motorist coverage is only available if the tortfeasor’s insurance company has paid you the tortfeasor’s policy limits. Underinsured coverage is designed to pay when the tortfeasor does not have enough insurance to pay your claim, so logically it only kicks in if the tortfeasor’s policy has paid its maximum and it was not enough to pay the full value of your claim.
Under and Up to States: Beware
With regard to underinsured motorist coverage, some states are what are called “under and up to” states. In an under and up to state you may only collect underinsured motorist coverage from your own policy to the extent that your coverage is greater than the coverage of the tortfeasor.
To make this easier to understand, let me give an example. Suppose that another driver, we will call him “driver A,” is 100 percent at fault for an accident with you. Suppose further that your claim is worth $100,000. Driver A has $20,000 in liability insurance and you have $50,000 in underinsured motorist coverage. You can collect the $20,000 in coverage from Driver A and $30,000 from your underinsured coverage.
As you can see, you can only collect your underinsured coverage to the extent that it is greater than the tortfeasor’s (driver A’s) liability insurance (your underinsured coverage, $50,000, minus the tortfeasor’s coverage, $20,000, equals $30,000 difference). Thus, for your $100,000 claim you will have a total of $50,000 in available insurance coverage. Unfortunately, unless driver A has a lot of money or assets, you are likely only going to receive half the value of your claim. The lesson: buy adequate underinsured motorist coverage.
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