Personal Automobile Policies

Many insureds face a greater risk of incurring an insurable loss arising out of their use of cars and trucks than out of their ownership and use of their home. Cars and trucks travel at high speeds on roads in close proximity to other vehicles. When collisions occur, there is naturally a great risk of serious property damage or bodily injury. Like homeowners policies, auto policies include both first-party coverages (i.e., coverage for physical damage to your car or truck) and third-party coverages (i.e., coverage for your liability for damages to others). In addition, depending on the jurisdiction, uninsured or underinsured motorist coverage or both may be required as part of the personal auto policy. These coverages provide protection for you if you are involved in an accident that is the fault of another driver and he or she either does not have liability insurance or has liability insurance with limits that are not sufficient to cover your damages. Finally, in a limited number of jurisdictions, drivers must carry nofault policies. No-fault auto insurance was intended to speed up the resolution of smaller claims and to lessen the number of personal injury lawsuits arising from less serious collisions. At present, there are twelve no-fault states. They are: ◆ District of Columbia ◆ Florida Chapter 13 Personal Automobile Policies ◆ Hawaii ◆ Kansas ◆ Kentucky ◆ Massachusetts ◆ Michigan ◆ Minnesota ◆ New Jersey ◆ New York ◆ North Dakota ◆ Pennsylvania ◆ Utah In addition, there are several other states where no-fault (formally known as personal injury protection) coverage is an optional coverage. If you live in one of the twelve mandatory no-fault states, you will need to learn about your state’s specific requirements. Even in these twelve mandatory no-fault states, the coverages and required minimum coverage limits vary. In addition, whether an insurer can opt out of no-fault coverage and the limits of injury or damage at which the no-fault benefits no longer apply vary from state to state. When an accident results in damages in excess of a given state’s mandatory no fault limits, the injured person retains the right to sue for damages. To complicate matters further, there are a few states where personal injury protection coverage can be purchased as an optional coverage. As a practical matter, the laws in many of these states overlap significantly with several of the states where no-fault coverage is nominally mandatory. Because the no-fault laws vary so much from state to state, it is beyond the scope of this book to do other than to highlight the need to understand your state’s no-fault laws and to govern your purchase of coverage limits accordingly. In addition, there is overlap between uninsured motorist and underinsured motorist coverage, and personal injury coverage. Thus, in an optional personal injury protection jurisdiction, a person needs to carefully consider the pros and 150 The Complete Book of Insurance cons of increased uninsured motorist and underinsured motorist coverage as opposed to purchasing increased limits of personal injury protection coverage. All states have some form of financial responsibility laws under which a person is not allowed to register a car or a truck without having provided proof of statutorily-mandated minimum levels of bodily injury and property damage liability insurance. Correspondingly, insurers in each of the states sell statutory limit liability policies that permit a person to satisfy his or her state’s financial responsibility laws to be able to register his or her car or truck. These minimum financial responsibility law requirements are usually very low—too low, in fact. They are not remotely sufficient given current auto prices, costs of repair, and medical and health care costs.

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