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.