Insurance – PIP and Other Needed Liability Coverage

In the past five years, in part due to the bad economy, clients have chosen to reduce automobile liability coverage and homeowner’s or renter’s insurance coverage.

The consequence of reduced or minimal liability coverage is great hardships on these clients. Often, clients do not realize how reduced coverages create enormous harm.

Here are a few examples:

I. Waiver of personal injury protection coverage [aka PIP]. The purpose of personal injury protection coverage is to cover your lost wages and medical expenses if you're in an automobile accident, whether it's your fault or not. The cost annually of PIP coverage is typically under $30. You may have been advised by your insurance agent that if you have health insurance and/or sick leave at your place of employment, you may want to waive PIP. One cannot predict the future, particularly whether or not you are going to be in an automobile accident and, if so, the nature and extent of your injuries. Let's assume that you are in an automobile accident and that, because of your injuries, you're out of work for three weeks and you earn $700 a week. If you did not waive PIP coverage, 85% of your lost income of $2100 could be paid to you in PIP benefits. But if you did waive PIP coverage, then this is an example of one of the hardships that individuals face as a consequence of not having that coverage available. PIP coverage may be purchased at different amounts. In Maryland, the minimum PIP benefit is $2500. Some companies, such as State Farm, offer their customers a PIP benefit up to $10,000. Other companies will write PIP insurance at $2,500 and provide supplemental coverage with Medical Payments of different amounts. Often Medical Payment benefits are in the range of $5000. Another related issue is that if you don't have PIP coverage, you will have to obtain medical treatment from a physician who accepts your health insurance. The consequence of being treated by doctors under your health coverage is that many of these competent physicians either are unfamiliar with the medical-legal process or do not keep meticulous records of your physical complaints and do not state opinions that your injuries are causally related to your accident. If your treating physician does not respond to these issues, the result may be that your case is worth less than it otherwise would have been worth during the settlement or at trial. My opinion is that if you waive PIP coverage, your potential exposure should you be in accident is worth much, much more than the approximately $30 you will save annually by waiving that coverage.

2. Not having an umbrella insurance policy. For approximately $300 a year, you can obtain from the same insurance company who provides you with automobile liability, PIP, and homeowner’s or renter’s insurance, $1 Million of additional liability coverage. Here are a few examples of what may happen if you're in an automobile accident that is your fault or if someone slips and falls in your home as a result of your negligence. Let's assume you have liability coverage of $100,000/$300,000. Let's further assume that the person you injured in an automobile accident or at your home is highly compensated at his/her place of employment, meaning he/she earns $100,000 or more annually. If the person you injured was a highly-compensated individual and was out of work for six months because of the accident, you might face a liability exposure of $50,000 for loss of income as well as large amounts of compensation for personal injury. Recently we defended an individual who had $100,000 in liability insurance but the claim against that individual was worth $250,000. The exposure to my client was $150,000. Without going into the details, we were able to resolve this case without the client having to pay the additional $150,000. However, had this client had an umbrella policy, the umbrella policy would have paid the $150,000. There are ways to increase your liability coverages, as well as PIP coverage, without a substantial increase in the annual premium. Generally, you can go to your insurance agent and inquire as to how much more it would cost to raise your liability coverage and, at the same time, to raise your deductible from $100 or $250 to $500 or $1000. Consider whether, in the past five years, you have brought claims in which you paid your deductible. It may be cost-saving to have the higher deductible and yet receive greater liability coverage without a substantial increase of your overall annual premium.

3. The consequences of having low coverage or no coverage. In the event you're sued and your liability insurance is inadequate and a court judgment is made against you for a large sum of money, your wages may be garnished. If you have equity in your house, the judgment can be attached against your house which would result in a forced sale of your home. If you didn't survive the accident, any judgment could go against the assets of your estate. Our office prepares last wills and testaments for clients. We request that our clients provide us with an inventory of their assets we ask how much liability insurance they have. If they have low liability coverage, we strongly recommend that they substantially increase their liability coverage so that they and their estates are protected.

In summary, do not waive PIP coverage, buy the most PIP coverage you can, and obtain a large umbrella policy.

Fred Antenberg has over 30 years’ experience advising clients concerning automobile liability and homeowner’s insurance. He does not sell insurance. Call Fred for a free initial consultation at 410-730-4404.