Over the past 20 or so years, I have had the opportunity to discuss the topic of car insurance with hundreds of clients. Most are surprised when they learn that don’t have the insurance they thought they had purchased. Often, they are convinced that they had purchased something called “full coverage.” Unfortunately, although the term is used a lot, there isn’t such thing as “full coverage;” there are actually very specific types of auto insurance coverages that need to be carefully considered.
So, in order to try and clear up the confusion, I have prepared a short primer on the basic types of car insurance available in Kentucky. This is not legal advice, but rather only a summary of information that is available from a variety of sources. If you have questions about your particular situation, please contact us or your insurance agent. Don’t wait until an accident happens to find out that you are not protected!
Liability coverage is what you buy to pay for another person’s damages if you cause an accident. Kentucky mandates that all drivers in a household have liability insurance and have proof of it in the car at all times. There are basically two types of liability coverage—Bodily Injury coverage and Property coverage.
Bodily injury insurance pays for the personal injuries to people that you injure in an auto accident, including occupants of your vehicle, occupants of other vehicles, and pedestrians. Kentucky law requires minimum bodily injury liability coverage of $25,000.00 per person up to a total of $50,000.00 for all of the persons injured in a single accident. This means that if you cause and accident and injure three people, all three people must share the $50,000.00 and no one person can receive more than $25,000.00 from your insurance.
Property damage insurance pays for the damage you cause to other vehicles and property in an accident. Kentucky requires minimum property damage liability coverage of $10,000 to cover the costs of repair to damaged property.
Given the cost of medical treatment and the cost to repair vehicles, minimum liability limits are often insufficient to protect you in the case of an accident. Therefore, consider purchasing as much liability insurance as you can afford. Having insufficient liability insurance coverage could leave you exposed to personal financial exposure.
NO-FAULT INSURANCE AND PERSONAL INJURY PROTECTION COVERAGE (“PIP”)
Kentucky follows a no-fault auto insurance model. Basically, this model requires that all drivers (unless they choose to opt out) purchase no-fault insurance, which provides them benefits from their own insurance company in the event of an accident, regardless who was at fault for the accident.
Personal Injury Protection (PIP) Coverage
The most pertinent no-fault benefit in Kentucky is PIP coverage. Kentucky requires basic PIP coverage on all motor vehicles except motorcycles. Basic PIP is to be paid by the insurer of the vehicle in which the injured person is riding at the time of an accident, or a vehicle that strikes a pedestrian, regardless of who was at fault in the accident. So, as I often tell my clients, if you accidentally crash your car into a tree, your insurance company will owe you basic PIP coverage. Basic PIP provides up to $10,000 per person per accident for medical expenses, lost wages, and similar “out of pocket” costs due to an injury. Lost wages are further limited to $200.00 per week. You can purchase additional benefits, usually in increments of $10,000.00.
A problem that I often see is when my client has purchased PIP coverage with a deductible, usually $1,000.00. In my opinion, a PIP deductible is not worth the minimal savings it provides. Imagine if you have to be taken to the hospital after an accident and incur a charge of $5,000.00. If you have a $1,000.00 deductible, your auto insurance company will only pay $4,000.00, leaving you to cover the rest. When you have been in an accident, and may be unable to work, the last thing you need is a large hospital bill.
An extremely important, but often neglected type of auto insurance is what I call “Self-Protection” coverage. This type of insurance protects you if you are involved in an accident and the other party is not adequately covered by an auto insurance policy. I have handled many, many cases where my client was severely injured but the other driver did not have sufficient insurance to cover the damage. It is my experience that most drivers in Kentucky carry only the minimum liability insurance (if any), which is simply not enough to cover you in case of a serious accident. There are essentially two types of “Self-Protection” auto insurance—Uninsured Motorist coverage and Underinsured Motorist coverage. I strongly recommend that you invest in both types of coverage.
Uninsured Motorist coverage applies if you are injured in an accident and the at-fault driver has no auto insurance. This coverage will also apply in most hit-and-run accidents. Kentucky law mandates that every insurer provide Underinsured Motorist Coverage; however, you may opt out of this coverage if you do so in writing. I have noticed lately that many insurance carriers are attempting to convince customers that they can save money by rejecting Underinsured Motorist coverage. Don’t be fooled. This type of protection is worth the money (and it is not terribly expensive).
Underinsured Motorist coverage applies if you are injured in an accident and the at-fault driver does not have enough insurance coverage to pay for your damages. For example, if you are injured and incur $50,000.00 in damages but the other driver only has minimum insurance coverage of $25,000.00, you can access your Underinsured Motorist coverage to recover the remainder.
I am often asked by my clients how much Uninsured and/or Underinsured Motorist coverage they should purchase. The simple answer is that you should purchase as much as you can afford. These coverages provide an extremely important benefit and are usually reasonably priced.
OWN PROPERTY COVERAGE
Insurance that applies when your vehicle is damaged falls under the category of what I call “Own Property coverage.” There are two basic types of Own Property coverage-Collision coverage and Comprehensive coverage. Both types can help you pay for damages to your car, even if an accident is your fault.
Collision coverage applies when your vehicle is damaged in a collision, regardless of who is fault for an accident. Although the at-fault driver’s insurance will usually pay for damage to your vehicle, it is often easier and quicker to use your collision coverage to pay for repairs to your car. Collision coverage is usually subject to a deductible, usually $250.00 or $500.00.
Comprehensive coverage (which is sometimes referred to as “Other Than Collision coverage”) provides property damage coverage for your vehicle when it is damaged by events other than a collision. For example, fire, theft, vandalism, weather, or impacts with animals are types of damages covered by comprehensive coverage.
Auto Insurance can be very confusing. Please carefully consider your needs and investigate the types of coverage before purchasing insurance.
If you have any questions, give us a call to set up your FREE consultation today!
By Mark B. Wallace, Esq.