Understanding Your Insurance
Purchasing insurance is one of the most important things you must do to protect yourself and your family. There are two primary reasons for purchasing insurance. First, the law requires you to purchase some types of insurance to protect others in the event that you unintentionally injure them. Second, you should purchase insurance to protect yourself in the event that the person who injured you is not adequately insured. Although purchasing your own insurance may seem unnecessary, it is crucial that you purchase your own insurance.
- Liability Insurance
- Personal Injury Protection (PIP) Insurance
- Uninsured/Underinsured Motorist (UIM) Insurance
- Umbrella Insurance
- Homeowners Insurance Replacement Cost Coverage
- Renters Insurance
Do You Have Enough Auto Insurance?
This insurance covers people whom you injure with your automobile. Washington law requires that you purchase insurance that will pay a minimum of $25,000 per person. If you injure someone and they file a claim against you, your insurance company should hire an attorney (at no charge to you) to represent you and protect your interests. If you do not have enough insurance to fully compensate the person you injured, you may need to hire (and pay for) an attorney to serve as “excess counsel” or “personal counsel” to protect your personal assets. If you injure someone in a collision and you do not have this insurance, you may receive a traffic citation, a fine, or have your driver license revoked. In addition, when you attempt to purchase insurance thereafter, it will probably be very expensive. In other words, if you don’t have insurance, don’t drive!
We recommend that you purchase at least $100,000 in Liability Insurance. If you have an above-average income, own a home or have other assets, you should have at least $250,000 in Liability Insurance.
Personal Injury Protection (PIP) Insurance
This is insurance that you purchase to cover your medical bills from a collision. In some cases, it may also cover your passengers, pedestrians, and bicyclists. This insurance pays benefits regardless of fault. In other words, even if you cause a collision, PIP insurance may pay for your medical treatment. Even if you have health insurance, you should purchase PIP insurance. PIP insurance is different (and better!) than health insurance because there is no deductible, no co-pay, and no pre-authorization requirement. You may choose any licensed healthcare provider to treat you. In most cases, PIP insurance will pay for alternative therapies such as chiropractic treatment, massage therapy, physical therapy, and acupuncture. PIP insurance is extremely cheap. The minimum coverage available in Washington pays up to $10,000 for collision-related medical treatment obtained within three years from the date of the collision. For an additional fee, you can purchase higher coverage such as $35,000 or $100,000. PIP insurance also provides limited wage loss benefits, funeral benefits, and loss of essential services to compensate for things such as babysitting, lawn care, and house cleaning. Because the insurance company representing the person who caused the collision will not pay your medical bills until you are ready to settle your entire case, you need PIP insurance!
We recommend that you purchase at least $35,000 in PIP Insurance. If you have an above-average income, own a home or have other assets, you should have at least $100,000 in PIP Insurance.
Uninsured/Underinsured Motorist (UIM) Insurance
Unfortunately, not everyone takes responsibility for their actions. Some people don’t purchase even the minimum amount of liability insurance required by the State and other people cause injuries that exceed the amount of insurance coverage they purchased. Because you cannot rely on other people to adequately insure you against the harm they may cause, you must take responsibility for yourself and purchase sufficient Underinsured Motorist (“UIM”) insurance to fully compensate you for injuries you may suffer through someone else’s fault.
If you are injured as the result of someone else’s actions, your UIM insurance may compensate you in the event the other person’s insurance is not sufficient, or in the event they do not have insurance. Your UIM insurance may even cover you if you are injured while walking, riding your bike, or if you are a passenger in someone else’s car. Although it may seem unfair that your insurance company would have to pay you, you are paying a premium for this insurance coverage. It isn’t something your insurance company is doing as a favor to you; they pay benefits because you purchase an insurance product to compensate you in the event you need it. One benefit of UIM insurance is that the method of resolving disputes on UIM claims is often more favorable, more economical, and more efficient than claims against the insurance company representing the person who caused the injury. As a result, we are sometimes able to obtain an earlier recovery from your UIM insurer, in the event that UIM recovery is applicable. UIM insurance is absolutely crucial. You cannot afford to be without it.
We recommend that you purchase at least $250,000 in UIM Insurance. If you have an above-average income, own a home or have other assets, you should have at least $500,000 in UIM Insurance.
Umbrella policies “float on top of” your other insurance policies to compensate people who you may have unintentionally injured at home or with a vehicle. They benefit you by providing additional insurance coverage in addition to your underlying policy and protect your assets from being seized by someone you may have injured. These policies vary from insurer to insurer. If you can purchase an umbrella policy that includes UIM insurance, it is a good idea to do so.
If you have an above-average income, own a home or have other assets, you should have a $1,000,000 Umbrella policy. If your net worth is over $1,000,000, you should have an even bigger Umbrella policy.
Homeowners Insurance Replacement Cost Coverage
Many homeowners insurance policies cover your household goods on an “actual cash value” or “ACV” basis. This means that they compensate you for the value of your goods immediately before they were destroyed. This is often referred to as “garage sale value.” Obviously, your household goods would be difficult to replace if you were reimbursed only for their garage sale value. However, if you purchase “replacement cost coverage” for your household goods, you can be reimbursed for the price it costs you to replace your destroyed household goods with “like kind and quality” new goods.
If you rent a home, condo or apartment, you should purchase “renters insurance.” This insurance covers your goods, not the dwelling. In most cases, if your goods are damaged or destroyed, your landlord will not be responsible for repairing or replacing them. Renters insurance is very affordable because you only purchase insurance for the amount of goods you have at that dwelling. Of course, you should also make sure that your renters insurance includes “replacement cost coverage” to reimburse you for the cost of replacing those goods, rather than the garage sale value.
Call Nelson Boyd attorneys for a free consultation at (206) 971-7601.