Insurance—What is it Good For?

Automobile insurance, health insurance, homeowner’s insurance, renter’s insurance. Med pay/PIP, comprehensive, collision, umbrella, and a few dozen other types.

How many of you really understand what each type of insurance covers and how it works? To me, there is no more important subject about which everyone should be literate than insurance. Yet few people have much understanding of what they purchase, what it covers, and why it matters.

Let’s take a quick refresher course.

Automobile/Medical Payments/Uninsured Motorist/Underinsured Motorist

This topic alone could be a several hundred page book, so I will keep this basic.

• Automobile insurance covers damage to your car due to collisions that are not your fault (comprehensive), such as a tree falling on your car or an animal running into your car, and those that were your fault (collision). Almost all policies have a deductible, meaning you must pay the first $500, $1,000, or more, before your carrier covers the rest.
• Liability insurance covers damages you cause. An example here is you run a stop sign and hit a vehicle, injuring the other driver. Your liability policy would cover their medical bills, pain and suffering, lost wages, and other damages up to the liability limits on your policy. Limits are expressed in amounts such as $100,000 per individual per incident/$300,000 per incident total. The goal, as I’ve written multiple times, is to purchase insurance with the highest limits you can afford. Why? First of all, so that you can protect your assets in the event your mistake harms someone else. But second, because Underinsured Motorist coverage limits will usually follow liability limits. Read more below to find out about that.
• Uninsured Motorist (UM) insurance covers damage you incur due to someone else’s negligence when they are not insured. Sure, Illinois is a mandatory insurance state, but not everyone maintains current insurance, and sometimes people fail to follow the requirements of their policies, meaning they are not covered. UM steps in to cover you here.
• Underinsured Motorist (UIM) insurance covers the difference between the at-fault party’s policy limits and yours. The typical example here is you are in a collision with Debbie Driver Defendant, who has a policy with $25,000 limits. You sustain a shattered tibia, fibula, and ankle ligament tears, all requiring surgery. Your medical bills alone are over $200,000. Obviously, DDD’s policy won’t pay for much of that, so you submit an Underinsured Motorist claim to your own carrier. Fortunately, you’ve read my blogs and have $1,000,000 in UIM coverage, meaning that you would have up to another $975,000 available to recover after DDD’s carrier tenders its policy limits of $25,000.
• Medical payments (“Med pay”)/PIP. This covers any medical bills you incur due to an accident up to a dollar amount limit, usually ranging from $1,000 to well over $50,000. This can come in handy if you don’t have health insurance, or your health insurance doesn’t pay everything.

Health Insurance

Health Insurance can be through your employer, the insurance exchange (Affordable Care Act, often referred to as “Obamacare”), or can even include quasi-public coverage like Medicaid (need-based) and Medicare (age-based).

I always recommend to clients who were injured in accidents that they submit all their bills to their health insurer. However, some providers will refuse to pay for bills incurred due to another party’s negligence. Also, keep in mind that if bills are paid through health insurance, most plans allow subrogation (recovery) of amounts paid out from any settlement obtained. If your health insurance paid a portion of that $200,000 hospital bill, it might pay at a vastly discounted rate of roughly $50,000. But that still leaves you with a portion of that $50,000 to pay back out of any settlement obtained.

Key to remember is that if you use medical payments coverage to pay a bill, it does not offer a discount to the provider, so you will eat up that dollar limit quickly and you will also have to pay back the amount paid, per the provisions of your insurance policy.

In almost all situations, your lawyer can negotiate a reduction of these subrogation amounts.

Homeowner’s and Renter’s Insurance

Many people fail to understand how important it is to have these types of coverage. First of all, remember that houses, apartments, and condominiums do get broken into. Theft of items will be covered. While that moth-eaten blanket on the couch isn’t worth much, you probably don’t want to replace the couch, the television, or the dining room table. And if you own any type of jewelry, you need to insure that.

There are also situations where you either must have this coverage, or are strongly advised to, such as living in a condo or townhome. I can only say my own experience living in a condo opened my eyes to the myriad of ways a neighbor could flood my bathroom from above (suffice it to say that allowing a three year old to take baths when a three inch hole remained uncaulked on the tub shelf can make a ceiling cave in.) Fun fact is that if you are honest and tell the insurer that you did not perform normal maintenance (ie. caulk a gaping hole in your tub), they will deny coverage, leaving your lawyer neighbor and his long-suffering wife to redo a bathroom on their own insurance!

Guess what else is covered by homeowner’s (and some renter’s) policies?

Dog bites!

Bike crashes!

Yeah, bet you didn’t know that. Now you do. If you own a bike or a dog, these policies are an absolute must-have.

Umbrella Insurance

Umbrella insurance is exactly what it sounds like; a policy catch-all for things above and beyond what your other policies already cover. Let’s take our earlier example of the crash with the person who only had $25,000 in coverage. But you had a million dollars in coverage, so you can get up to another $975,000. That’s enough, right?

What if the leg never healed? What if it was so badly damaged it had to be amputated? What if this meant you couldn’t return to your job as a warehouse supervisor? You also needed to retrofit your home and car to allow you to function and ambulate.

If you had an umbrella policy of, say, $10,000,000, you’d have all that contemplated and covered. Sure, it’s an incredibly unlikely and drastic scenario. But then again, I had a client in a car crash where his tibia and fibula were so badly fractured you could put a fist through the bones. He had a standing job he was unable to return to for eight months. And the other driver only had $20,000 in insurance, then the state minimum. The best I could do was cobble together a grand total of $100,000. That’s not nearly enough to do much of anything. It didn’t even cover all the bills without me negotiating them down significantly.

It doesn’t matter who you are or what you earn, if you can afford a few hundred dollars a year, you can have an umbrella policy of a million dollars or so.

And if you have teen drivers, this is a no-brainer.

Takeaways

• There are many types of insurance. Everyone should understand the basics of what they cover and why they need them
• Paying a little for insurance now can protect your assets later
• Insurance can even cover things you didn’t imagine would be covered by insurance

Contact Chicago Personal Injury Lawyer Stephen Hoffman

As in all cases involving injury, workers’ compensation, medical malpractice, or other injury and potential liability, if you need to make an insurance claim due to an injury, immediately get medical treatment, report the crash to police and your own insurance company, and contact a lawyer with expertise in your type of case, such as bicycle accidents or pedestrians hit by cars.

If you've been in an accident and have questions, contact Chicago personal injury attorney Stephen L. Hoffman for a free consultation at (773) 944-9737. Stephen has over 30 years of legal experience and has collected millions of dollars for his clients. He is listed as a SuperLawyer, has a 10.0 rating on Avvo, and is BBB A+ accredited. He is also an Executive Level Member of the Lincoln Square Ravenswood Chamber of Commerce.

Stephen handles personal injury claims on a contingency fee basis, which means you don’t pay anything up front, and he only gets paid if you do. Don’t wait another day; contact Stephen now.