car insurance Archives - Levinson and Stefani

Why cheap car insurance hurts you in the long run

Each month, we take stock of the most popular posts on our blog. Invariably, one is more popular than all the others: “Here’s why your car insurance is going up in 2016.”

Granted we’re not living in 2016 anymore, but based on the evidence we can assume that people remain interested because the cost of auto insurance continues to rise each year.

Unfortunately, that means consumers make short-term decisions to save money, and that’s what brings us to the issue of substandard insurance policies.

We’ve written quite a bit about state mandates, which requires all drivers in Illinois to carry minimum liability coverage of $25,000. Substandard insurance is primarily defined as a policy that offers the bare minimum at relatively low premiums. The problem with that, however, is that substandard policies are designed to make you believe the minimum is enough to protect you when it isn’t.

One reason is bodily injury, which is practically impossible to predict. Depending on the severity of the injury, you could be looking at hundreds of thousands of dollars in medical bills, where $25,000 is barely a drop in the bucket. We’re talking the cost of an ambulance, emergency surgery, a long hospital stay to recover from injuries. Those costs can be significant and financially paralyzing.

Another reason is related to your long-term health, such as your ability to perform a job, whether you’ve lost work, whether you actively participate in the community, and whether you suffer from a terminal injury.

In situations like the one above, insurance is about the only thing protecting you and others from dire situations, both health-wise and financially. You’re also making it easy for insurance companies to simply walk away from the situation when it’s no longer a legal responsibility.

Take this example. A man with a substandard policy crashes into a minivan hauling three kids. Two of them become seriously injured. As the at-fault driver with the substandard policy, your insurance is responsible for picking up the medical bills. But based on your policy, only $25,000 is collectable. Now let’s imagine that the kids’ medical bills cost upwards of $200,000. If attorneys get involved, you could be responsible for the $175,000 difference (and possibly much more) depending on the circumstances of the crash.

Let’s say you lose that lawsuit. Then it’s a matter of duking it out with your insurance company to make up for the difference, which means you’re fighting two battles, both of which you could end up losing. Badly. The above is just one example of the pitfalls of opting for substandard insurance policy.

People often ask us what types of insurance policies we recommend and whether it’s enough to protect them in times of crisis. It’s hard to give a good answer because every person is working under different circumstances. But what we often recommend is that drivers take time to look at their policy, understand it and ask questions. Discovering where you might be vulnerable is worth the effort, as is the protection that comes with a quality insurance policy.

Understanding your insurance policy

Associate Attorney Tiffannie Kennedy breaks it down

Insurance can be confusing, hard to navigate, and increasingly frustrating when you don’t know the terminology. Here’s an example: Illinois law requires all drivers to carry a minimum of $25,000 in liability coverage for bodily injury per person; $50,000 for bodily injury per accident; and $20,000 for property damage. Illinois Law further requires drivers to purchase Uninsured Motorist Coverage, with limits equal to Bodily Injury Liability Coverage limits, unless you select lower limits in writing. The minimum Uninsured Motorists Coverage limits allowed by law are $20,000 per person and $40,000 per accident.

So, let’s break that down based on the following scenario: Mom, Dad and their two children are heading out of town for the weekend. A distracted driver doesn’t see that traffic has suddenly stopped and rear-ends the new family car. The crash causes extensive property damage, and Mom is suddenly rushed to the hospital by ambulance. Dad and the two kids appear to be in good shape. But once the adrenalin subsides, Dad experiences back and neck pain, which requires two steroid injections and six months of physical therapy. When all is said and done, Mom’s medical bills are $15,000 and Dads are $30,000. The family vehicle is a complete loss.

Assuming the insurance company accepts fault, the distracted driver’s minimum insurance policy should cover all of Mom’s medical bills and $25,000 of Dad’s medical bills. But there’s $50,000 total—and the medical bills in this scenario total $45,000. So why doesn’t the at-fault driver’s insurance cover everything? Because the policy only pays $25,000 for each person, meaning Dad needs to find a way to account for the other $5,000. As for that new family vehicle? While the outstanding loan on the car is $29,000, the distracted driver’s policy in this case is only paying $20,000, meaning Mom and Dad are on the hook for the additional $9,000; add that to unpaid medical bills and the victims here now owe $14,000!

Let’s change this scenario a bit and pretend the distracted driver was in between jobs and decided not to pay her insurance premium one month, making her an uninsured driver. Meanwhile, Mom and Dad are putting two kids through school and can only afford the cheapest insurance policy—the minimum required by law. So, since the driver has no insurance, the entire financial loss falls to Mom and Dad’s insurance company. Mom’s medical bills still get paid, but Dad still has that extra $5,000 in excess medical bills over the policy limit of $20,000, and the totaled car isn’t being covered by anyone’s insurance policy.

Let’s change the scenario one last time. This time, Mom, Dad and our distracted driver all have the minimum required coverage, but Mom and Dad have elected to purchase underinsured insurance coverage (something not required by law). Mom and Dad’s underinsured policy limits are $50,000 in liability coverage for bodily injury per person; $100,000 for bodily injury per accident; and $25,000 for property damage. In Illinois, underinsured coverage must be higher than the at-fault driver’s basic coverage for it to apply. In this last scenario, the at-fault driver’s insurance policy would pay for all of Mom’s bills, most of Dad’s bills and part of the vehicle damage, however the underinsured coverage would kick in and pay for the rest.

Based on the hypothetical situations above, you can see why attorneys are important in cases such as this. Insurance can be a minefield of complex contractual jargon, some of which the insurance companies don’t fully understand. It gets even more complex when injuries are involved, some of which can be chronic and even terminal. You need someone to protect your interests, and that’s exactly what our attorneys here at Levinson and Stefani do for you. Have insurance questions? Reach out to our office, we’re here to help.

Video: How car insurance can help cyclists in times of crisis

Your coverage isn’t limited to auto crashes alone

Please note: Transcript edited for clarity, brevity, and readability.

Why is car insurance important for cyclists?

It may seem counterintuitive, but if you’re riding your bike and [the driver who hits you] has car insurance, that makes it straightforward, meaning their car insurance, is going to cover your injuries. Where your car insurance comes into play: If you get hit by a car that doesn’t have insurance, your insurance can step in [the place of the uninsured driver].

Can you provide an example?

This pops up most often in two scenarios. The first one is a hit-and-run. if you’re riding your bike and somebody hits you and takes off, your car insurance can step in and cover your medical bills related to your injuries. The second scenario is if you’re hit by a car and the driver has no car insurance. In both of those scenarios your car insurance can help.

Do you think cyclists are unaware that car insurance can help them in a crash situation, and if so why?

When most people think car insurance, they think of a car crash, meaning they’re in a car. But your car insurance covers you whether you’re in a car or not. One important factor is that you likely have what’s called a Medical Payment Provision or MedPay, which means the other driver’s insurance will pay up to a certain amount of your medical bills so you don’t have to worry about submitting bills to your health insurance or getting doctor’s bills paid right away—whether it’s an ambulance, emergency room visit, a visit to your doctor. On the flip side, your car insurance can cover the first level of your medical bills.

What should cyclists do in a hit-and-run situation?

The first thing you need to do is make sure you get medical attention. Beyond that, you want to make sure that you file a police report. That’s something that your insurance will often require. Give as much detail as you can. If you’re able, see if there are witnesses. The police may be able to do that, but they may not. A good attorney will likely send an investigator to see if there are surveillance cameras, whether it’s city red-light cameras or stores in the area. In a hit-and-run situation, you want to clearly document and prove that you were in a crash that was somebody else’s fault.

What are some of the most common problems that cyclists face in these types of cases?

The biggest problem is they wait too long. Most states have what’s called a statute of limitations. It’s basically a deadline to file a lawsuit. Here in Illinois, for example, it’s generally two years. There are some exceptions. One of the other mistakes: if the injured party can identify the car that hit them and they don’t file a police report, or they don’t exchange information. You want to treat a bike injury as if you were driving a car. You want to exchange contact information, insurance information, and you want to contact the police so there’s a police report. Get some pictures, if possible.

What are some things that cyclists can do to protect themselves?

I think most people are aware of the GoPro craze. This is a big issue with bicycles, especially because it’s not uncommon for drivers to blame cyclist. It happens regularly. I think a lot people of people have a perception that cyclists are crazy, unsafe, ignore all the rules. Something like a helmet camera can provide incredible evidence to prove that you weren’t doing anything wrong, and that the driver is the one at fault.

Uninsured vs. Underinsured Motorist Coverage

We’re often asked to break down the difference between uninsured and underinsured motorist coverage. Jay explains what they are and why it’s important to look over the details with an attorney if you’ve been in a crash.