Auto Insurance Explained
“What is it ? What Does it Pay if I'm injured ?
“FullCoverage” is the response I often receive when I ask my clients about their auto insurance. This is a term probably given to them by their insurance agent, but in reality has no legal significance. Too often my clients learn too late that they don't have adequate insurance to reimburse them for their medical expenses, lost wages and other damages. Knowledge of both the requirements of Florida law and the available insurance coverage options is the best guarantee that you will secure insurance coverage that you can both afford and which protects your financial assets and pays for any losses you may sustain in an automobile accident.
PERSONAL INJURY PROTECTION (“PIP”)
“PIP” is the “No-Fault” portion of your insurance coverage. It is required under Florida law in order to obtain a driver's license whether you own a vehicle or not. PIP coverage is the first source of coverage for your medical expenses and lost wages should you be involved in an accident. The typical policy includes $10,000 in coverage limits which pay 80% of your medical expenses and 60% of lost wages incurred as a result of an accident.
A deductible up to $1,000 is available, however, I NEVER advise my clients to make this election. While a deductible against your PIP coverage may slightly reduce the premium, should you become involved in an accident, you are then personally responsible for the first $1,000 in medical bills. The trade-off in a small reduction in the premium is simply not worth that risk.
If an auto accident renders you unable to work and household bills and expenses cannot be paid from another source ( ie. savings, loans, etc) then your PIP coverage can be used to pay up to 60% of your lost income to pay those expenses up to the $10,000 policy limits. However, if not absolutely necessary, I generally counsel clients to reserve PIP for their medical expenses, which can often exhaust the policy limits in a shockingly short period of time.
Medical Payment Coverage (“Med Pay”)
“MED PAY” is supplemental coverage for your medical bills after PIP benefits have been exhausted. It is usually offered in $5,000 increments and is NOT required by Florida law. It will pay the portion of your medical expenses not covered by PIP – most often the 20% which remains after the $10,000 limits have been paid.
Bodily Injury (“Bi”) Coverage
“BI” coverage pays for personal injuries that you may have caused to a third party in an accident. This is only paid if it is determined that you were at fault in the accident, either as acknowledged by your insurance company's adjuster or after a judgment entered against you after trial, if the claim proceeds that far. You should take stock of your financial assets ( excluding “Homestead” property, which is exempt from judgment) and future earnings when determining how much Bodily injury coverage you should secure.
Amazingly, BI coverage is NOT required under Florida law. Regardless of that fact, if you have financial assets and a family that looks to you for financial support, this coverage is essential to protect you from potentially devastating financial circumstances should a judgment be entered against you for personal injuries to a third party.
Uninsured Motorist (“Um”) Coverage
As previously stated, Florida law does not require drivers to carry BI coverage. This is terrible public policy, but it is the law nonetheless. “UM” coverage provides payment for your medical bills and lost wages if you are injured by a driver who has elected to drive without BI coverage or with low BI policy limits which do not adequately cover your damages. UM coverage typically increases your premium by 7 to 9%, however, you must balance this increase against the potential calamity should you be injured by an at fault driver without insurance and be left with nowhere to seek reimbursement.
“When does it start to pay? Do I have to pay it back?”
If you are injured in an auto accident, your PIP coverage is the first insurance responsible for paying your medical expenses. This is, in part, why Florida law requires drivers to carry proof of insurance with them at all times while operating a motor vehicle.
As a result, PIP coverage is usually referred to as “primary” coverage in relation to any available health insurance you may also maintain either individually or through an employer-based group plan.
In addition, all health insurance policies contain specific provisions that the insurer is not responsible for auto accident related injuries until proof is provided that the PIP benefits have been exhausted.
Medical Liens: What Are They?
While medical bills paid by PIP coverage do not need to be paid back out of the proceeds obtained from the other driver's BI coverage, the same is not always true if medical expenses were paid by a health insurer. Many insurers have also included provisions in their policies, that if they pay medical expenses for injuries caused by the negligence of a third party ( read : at fault driver), the health carrier may assert a lien against any proceeds recovered from the at fault driver.
At the Heyman Law Firm, we usually receive a notice of claim of lien from the health carrier as soon as benefits are paid above and beyond the available PIP coverage. Upon settlement or after trial, we request a final accounting and lien amount which, depending on the health insurance plan, can be negotiated downward. This results in a greater percentage return of the settlement proceeds to the client.
Exception : ERISA – backed health insurance plans
Some employers elect to provide an ERISA backed health insurance plan to their employees. Such plans are backed by the Federal Government and provide little or no leeway when settling the lien claimed for health benefits paid to clients injured as a result of third party negligence – such as in automobile accident cases. By Federal statute, ERISA plans can demand 100% payment for the benefits paid. At the Heyman Law Firm, we notify our clients as soon as we become aware that an ERISA plan is involved. If there is room to negotiate after a settlement is reached, we will do so on the client's behalf.
Did You Know?
- Declining economy results in more uninsured drivers
- 1% increase in unemployment = ½% increase in uninsured drivers
- 13.8% in 2007
- 16.1% possible by 2010*
- Florida is in top 5 states for number of uninsured drivers
- estimated 23% of Florida drivers do not have sufficient insurance*
- Drivers convicted of certain traffic offenses or involved in motor vehicle accidents without insurance required to carry 10/20/10 coverage.+
- Drivers convicted of DUI must obtain 100/300/100 coverage +
+ Florida Statute Ch 324.023
* Per Insurance Research Council