What Insurance Should You Buy?

At Owens & Mulherin, we have noticed that insurance adjusters fail to explain to their clients, i.e., you, what insurance they should buy. We often hear our clients, as well as the at fault drivers, state that they have bought “full coverage.” Note that this is a meaningless term. Automobile insurance is like ordering off of a menu. You pick what you want. The only thing that Georgia requires is $25,000 per person, and $50,000 per occurrence (no matter how many people are injured, the insurance would only pay a total of $50,000) liability coverage. Nothing else is required. Thus, full coverage only means that you have met Georgia’s statutory limits of insurance coverage. Those limits are generally inadequate. The following are the categories of automobile insurance which can be purchased, as well as our recommendations in regard to same:

LIABILITY COVERGE FOR BODILY INJURY OR PERSONAL INJURY

This coverage is needed if a motor vehicle collision is your fault or the other driver alleges that it is your fault and makes a claim against you or sues. This coverage provides a defense (an insurance adjuster until the lawsuit is filed and then pays for a defense attorney after a lawsuit is filed) and indemnity (will settle or pay a judgment up to the policy limits). $25,000 per person and $50,000 per occurrence is required in Georgia. This is enough if you have no assets to protect but is not enough if you have assets to protect. Of course, more coverage costs more money. If you have assets to protect, we suggest at least $100,000 in liability coverage per person. If you have significant assets, you should buy more than that. 

UMBRELLA

Umbrella coverage is an additional liability policy that pays after your liability coverage is exhausted, and is typically for $1,000,000 liability. Same is usually fairly inexpensive, i.e., a few hundred dollars per year, but it requires that you have high underlying liability limits, typically $250,000 or $300,000. Thus, if you have very significant assets, you want this coverage. Otherwise, you do not. 

COLLISION

This is property damage coverage for your car after a motor vehicle collision. You need this coverage if the motor vehicle collision is your fault or if you cannot settle your property damage claim with the other driver’s insurance carrier. Your insurance would then pay your property damage (repair your vehicle or pay you the fair market value of your vehicle if your vehicle is totaled). Your insurance company then owns your claim (called subrogation) and can make a claim against the other driver and their insurance carrier. You lose your deductible when your insurance company pays for your property damage, although some insurance companies will waive the deductible and pay you the entire amount up front. After your insurance company has paid you for your property damage, they will try to collect from the other insurance company. If they do so, they will normally get your deductible back and will then reimburse you for your deductible at that time. 

COMPREHENSIVE

This also pays you for your property damage but is for situations where your vehicle is not involved in the collision, i.e., is damaged from hail or hit a deer, etc. Note that, when the value of your car is low enough, you may want to drop collision and comprehensive coverage because the cost of the coverage, in relation to the value of your vehicle, may be too high. 

RENTAL VEHICLE

Same provides you with a rental vehicle if your car is not drivable after a motor vehicle collision. If the other party’s insurance company accepts responsibility for the collision, that insurance company will normally provide you with a rental vehicle. Thus, this coverage applies if the motor vehicle collision is your fault or you cannot resolve your property damage claim with the other driver’s insurance company. 

MED PAY OR MEDICAL PAYMENTS

This is a health insurance rider on a motor vehicle collision policy. The coverage follows the car. This means that any person in your vehicle has health insurance up to the limits of med pay. It has nothing to do with fault. This insurance is primary, i.e., it pays first and is before an individual’s health insurance. Same is very useful and we recommend buying at least $5,000 in med pay.

UIM/UM

Underinsured motorist coverage or uninsured motorist coverage is basically the same thing. Uninsured motorist coverage means that the other driver has no liability coverage, while underinsured motorist coverage means that the other driver has inadequate liability limits in relation to your claim. UIM/UM can be purchased for bodily injury (or personal injury) and property damage. Since the other drivers are only required to carry $25,000 per person personal injury (or bodily injury) liability, we strongly recommend that you purchase some underinsured motorist coverage. 

There are two types of UIM/UM coverage, and you have to elect, or choose, which one you want. Traditional, or drop-down, underinsured motorist coverage ensures that the other driver has at least as much liability coverage as you have UIM. For example, if you had $50,000 UIM traditional or drop-down coverage and the Defendant had $25,000 in liability coverage, your UIM would ensure that the total coverage for your personal injury claim is $50,000. Thus, you would have the Defendant’s $25,000 in liability coverage and $25,000 in UIM thereafter, for a total of $50,000 in coverage in regard to your personal injury claim against the other driver. 

Excess, or add on, UIM is what we recommend! Excess or add on UIM provides an additional amount of insurance after you have used up the Defendant’s liability coverage. Thus, if you have $50,000 in add on or excess UIM, and the Defendant has $25,000 in liability coverage, you can collect the Defendant’s $25,000 liability coverage and then $50,000 from your UIM, for $75,000 total coverage for your personal injury claim. 

We also suggest at least $25,000 in UM/UIM property damage add on or excess. If your car is worth more than $25,000, and the other driver only has the required $25,000 in liability coverage, your UIM would ensure that you have a total of $50,000 in coverage. Of course, if you have $50,000 in collision or comprehensive coverage, you do not need the property damage UIM.

Finally, please notify your insurance carrier in writing after an MVC even if you doubt that you will use your insurance! Policies generally require written notification (emails are written, so it does not need to be via a letter) as soon as possible or within 30 to 60 days. Same is a condition to using your policy later if needed.  A failure to notify may mean that you lose your coverage for that MVC. Notification does not affect your insurance premium. Use of UIM also does not affect your premium as a matter of Georgia law. Georgia has a statute indicating exactly that. In other words, your premium can only increase, as a result of an MVC, if it was your fault. 

We hope that the above is helpful for you in regard to purchasing insurance. In particular, note that med pay and UM/UIM are for you, so we recommend same. Note that insurance companies will not  allow you to buy more UM/UIM than you have liability coverage. Thus, if you want more UM/UIM than you have liability coverage, you will also have to increase your liability limits up to the same limits that your purchased for UM/UIM. Then please choose excess or add on UM/UIM coverage.

Should you have any questions about appropriate insurance limits, you can discuss same with your insurance agent as well. Unfortunately, many agents rush through the process and leave individuals with inadequate insurance. We hope that the above helps with your decision regarding what coverage is appropriate for you.