Insurance 101 – How Much Coverage Do I Need?
We all buy insurance for our cars, motorcycles, homes and even our own health. It is a wise investment to protect against unexpected losses, but how much coverage should you have? We routinely consult with potential clients who have no idea how much insurance coverage they have and what losses are covered. This is the second article in a series focusing on important topics on insurance. This information will serve to educate you, the consumer, to make smarter choices and ensure that you and your loved ones are protected.
All too often we meet with clients who have been injured and find out that the person who caused their injury does not have sufficient coverage for the arm they have caused. While we normally see this from the injured person's perspective, one can only imagine how it must feel to be the at fault party and be faced with a situation where you do not have enough insurance to cover a loss you may have caused, albeit accidentally. In that situation, your personal assets that you have worked so hard for may be at risk, so it is critical to review your coverage and make sure it is adequate. It is important to note that insurance not only protects you from claims for harm caused to others but often more importantly can provide coverage to you, the insured person, and your family. How much is enough coverage is a question that depends on each person's individual situation but the following are some considerations when reviewing your coverage.
One of the most common questions we are asked as attorneys is: "How much liability coverage do I need?" That depends on a person's assets and income; of course the more assets you own, the more you have to lose in the event of a catastrophic loss. The State of Minnesota mandates that all drivers have liability insurance in the amount of $30,000 for injuries to one person and $60,000 for injuries to two or more people in a given crash. That means if you cause a crash and one person is injured there is $30,000 in available liability coverage for that person's injury. If two or more people are injured, the minimum liability coverage is $60,000 ($30,000 per person); so if three or more people are injured, the $60,000 must be apportioned between all of the injured people. This is often referred to as 30/60 coverage – $30,000 per person/$60,000 max. per incident. While this is one of the higher minimums in the country it is too low to protect most people on the road. We recommend a minimum of $250,000 per person and $500,000 per incident. You may be surprised at how inexpensive higher levels of coverage can be especially if you have a good driving history. If you can afford it, we recommend buying as much liability coverage as you can afford up to and sometimes exceeding one million dollars in coverage depending on the individual. Similarly, you may want to consider an umbrella or excess liability policy which provides additional liability coverage.
Most people are cautious drivers and are more likely to be injured by someone else's negligence than to be at fault for a crash. Because of this it is crucial to evaluate your auto policy for the types of coverage that protect you and your resident relatives in the event you are injured by another driver. These include no-fault, underinsured motorist and uninsured motorist coverages.
No-Fault/Personal Injury Protection
Minnesota is one of 12 states that have or include no–fault car insurance coverage (also known as Personal Injury Protection or PIP). The benefit of this coverage is that, regardless of how or why the crash happened, you as the named insured and your resident relatives are eligible to receive payment of your medical bills and reimbursement of your income loss. The minimum No-Fault policy will provide at least $20,000 in medical expense benefits and $20,000 in payments for lost wages and replacement services, subject to a maximum of 85% of average weekly wage up to $250 a week for lost wages and $200 a week for replacement services. (Note that for crashes occurring after January 1, 2015 the weekly max. wage loss benefit increases to $500). However, if you insure multiple vehicles with the same company you can elect to "stack" the policies to increase your medical and wage loss coverage. Thus, for example, if you have two vehicles and elect to stack the two policies, you would have $500 in weekly wage loss coverage with total wage loss coverage of $40,000 and $40,000 in total medical expense coverage. Some companies also offer higher coverage amounts per vehicle so even if you only own one vehicle you could increase your PIP limits to $50,000 in medical expense benefits per incident.
As discussed above, state minimum liability coverage is often inadequate to cover harms and losses sustained in a crash. Underinsured motorist coverage (UIM) provides additional coverage to an injured person under their own policy when the at-fault driver lacks adequate coverage. Similarly, uninsured motorist coverage (UM) provides coverage in the event you are injured by a driver that does not have insurance. Many times UIM/UM coverage mirrors your liability coverage but it is important to find out how much you have. We recommend a minimum of $250,000 per person and $500,000 per incident of UIM/UM coverage.
It is important to make sure your "toys" such as boats, ATVs, golf carts and the like are adequately insured as they are often not covered under standard automotive and homeowner's policies. Similarly, there are unique considerations for motorcycles in Minnesota and motorcycle coverage will be addressed in a future Insurance 101 article.
Many of the above principles apply to homeowner's and renter's insurance. Buy as much coverage as you can afford and is adequate to cover you and your family for unexpected harms and losses. As the old adage goes - better safe than sorry.
NOTE: The coverage afforded under each policy is dependent on the individual policy and you should always read the actual policy to understand what is and what is not covered. Please call the experienced personal injury lawyers at Maschka, Riedy & Ries (507-625-6600) for a free consultation and review of your current coverage before you have an accident to ensure you and your loved ones are adequately covered.