Understanding Your Auto Insurance Policy

Whether you are getting ready to purchase or to renew your car insurance policy, or if you have been involved in a car accident, it is important to know what coverage you actually have purchased and whether it fits your needs. Although your auto insurance agent may tell you that you have "full coverage," your understanding of what "full coverage" means may be very different than your actual policy.

We at Worth, Magee & Fisher urge you to examine your automobile insurance policy, using this information as a guideline, with the hope that the information we provide will help you to understand your policy and will help you to decide if the coverage you have is what you need. Please keep in mind that the information below is offered merely as a guide and is for your general information. Be sure to contact your insurance agent to discuss your insurance needs, and contact our office if you have any questions.

Pennsylvania law requires that all registered motor vehicles have a minimum amount of insurance, and it also requires all insurance companies to make available, although at an increased premium, various other types of coverages. By looking at your insurance premium notice, you can determine the types and amounts of coverage you have. Below we detail various types of coverage. Compare them to your premium notice.

Mandatory coverage includes liability and medical benefits. Your policy must include these coverages, but you can customize your policy as noted.

  • Liability coverage is designed to compensate anyone who is injured in a car accident that is your fault. In Pennsylvania, each car must have at least $15,000 in coverage, and you may purchase additional coverage up to $300,000. Most policies also provide for what is called a "split limit" liability. On your premium notice you may see "liability - 25/50," which means that any one person that is injured because of your negligence can receive no more than $25,000 from your insurance company, and the most your insurer can be responsible for as a result of any one accident is $50,000, regardless of how many people are injured. An easy way to remember this is $25,000 per person and $50,000 per accident.
  • Medical benefits will pay medical bills for any treatment, including medications, required as a result of injuries you receive in a car accident, regardless of who may be responsible for the accident. Pennsylvania law requires your policy to cover at least $5,000 in medical benefits, and you may purchase up to an additional $1 million in coverage for payment of your medical bills caused by any automobile accident.

    In most cases, your car insurance company is not required to pay the full amount of a medical bill it receives from a hospital or doctor. Rather, the insurer has the right to "re-price" (i.e., reduce) the bills, which results in a reduced amount being paid by the insurer. The doctors and other providers are required to accept the "re-priced" amount in full satisfaction of the bill, and they are not allowed to bill you for any balance that remains unpaid due to the re-pricing. Unlike health insurance, there are no co-pays or deductibles in car insurance medical benefits.

    Your insurer has to pay medical bills you incur as a result of any car accident, even if the accident was not your fault. Although this may seem unfair, that is the way Pennsylvania law is set up.

    Your insurance company's obligation to pay for your medical bills is limited by the amount of medical benefits coverage you have purchased. Once you have used up, or "exhausted," the medical benefits on your car policy, any remaining unpaid medical bills should be submitted to your health insurance company. Your health insurer will be responsible for payment of those bills subject to the terms of your health insurance plan.
  • Limited tort vs. full tort is a very important choice you must make. If you select the "limited tort" option, you cannot file a claim for your pain and suffering unless you have a "serious injury." The law is very unclear on exactly what this means. If you have an injury to a tendon, ligament, or "whiplash" type of injury with no extensive hospitalization, several months of physical therapy, and time missed from work, you probably do not have a "serious injury." If you do not have a "serious injury," you will not be compensated for all of the pain, discomfort, and aggravation. Although the "full tort" option costs more than the "limited tort," we strongly recommend you purchase it. As with all of our recommendations, please consult your auto insurance agent to make sure you are making the proper choice for your personal situation.

Optional coverage includes income loss benefits, uninsured motorist/underinsured motorist (UM/UIM) coverage, and a number of other available benefits. These benefits are not mandatory but can be used to further customize your policy to meet your personal needs.

  • Uninsured/underinsured (UM/UIM) coverage is important because it protects you and your family if you are injured in a car accident caused by another driver who either has no insurance or not enough insurance to fully compensate you for your injuries.UM/UIM coverage cannot be higher than your liability limits, but it can be lower. Bad things can, and do, happen to good people. We see it every day. About 80% of the auto accident victims that we have represented either had or wished they had this coverage because the other driver did not have enough insurance or did not have any insurance at all. For that reason, we highly recommend this coverage.
  • Stacking v. Non-Stacking refers to how much UM/UIM coverage will be available under your policy. The simplest example is that, if you have more than one car on your policy, you can choose to "stack" the UM/UIM coverage, and that means that whatever amount of UM/UIM coverage you have available on the policy will be multiplied by the number of cars you have on the policy. This will also allow you to "stack" your UM/UIM coverage on top of other UM/UIM coverage which might be available to you, such as the policy of the vehicle in which you were a passenger when the injury was received.

    This issue has a whole lot of arms and legs to it that are beyond the scope of this article, but this gives you a general idea of what the terms mean. Since we are of the view that there is no such thing as too much insurance, we recommend you choose the "stacking" option, but, as with all our other recommendations, we urge you to consult with your own insurance agent to determine your own insurance needs.
  • Income loss benefits reimburse you for wages lost as a result of injuries received in a car accident and are available at various levels, with maximums up to $2,500 per month and a total of $50,000.Like medical benefits, if you purchase this coverage, your company pays this to you regardless of who was at fault in the accident. In general, you will receive 80% of your lost wages, but the insurer does not have to pay you for the first five days of missed work. However, if the accident is the fault of the other driver, you will be able to make a claim for these first five days of lost wages, as well as any lost wages which exceed the income loss coverage you have purchased.
  • Other available benefits include an accidental death benefit of at least $25,000, which is similar to a life insurance policy but requires that the death be caused by a motor vehicle accident. Funeral benefits of at least $2,500 are also available. Property damage benefits pay for property damage suffered by others as a result of a car accident that was your fault. Collision benefits pay for damage to your vehicle when it is involved in an auto accident regardless of the fault. Be aware that deductibles apply to property damage benefits, and they range between $100 and $500. Plus, you must pay the deductible toward repairing the damage. The higher the deductible you choose, the lower your premium. Also available is comprehensive coverage, which will pay for damages caused by something other than an accident, including vandalism, and sleet and hail damage.

Please examine your policy and compare it to the information above. Then decide if the coverage you have is what you need. If it is not, call your auto insurance agent to discuss your insurance policy, and contact our office if you have any questions. If you are in an accident and find that your coverage is inadequate, it will be too late to adjust your policy.