Yes, you could be laughing at the hysterical commercial, think the mascot is cute, or enjoy seeing a personality or band that you love in a fun advertisement for auto insurance, but if you do not know the intricacies of choosing the correct coverages in your auto insurance policy, you can be crying in the end.
This is what the funny commercials do not tell you. Essentially, any insurance company that's going to save you money on your car insurance may simply be selling you less insurance for less money. In New Jersey, there are certain components of your automobile insurance policy that you should certainly be aware of so that you can make the proper choices for you and your family.
Specifically, the critical components of an automobile policy are Personal Injury Protection (PIP), liability coverage-Bodily Injury, liability coverage-Property Damage, Underinsurance Motorist (UIM), Uninsured Motorist Coverage (UM), and the Verbal Threshold or Limitation of Lawsuit Threshold. It is the choices that you make with regard to each of these components that ultimately makes up your premium when taking into account your driving history and the specific types of vehicles that you drive. Whether you elect comprehensive coverage and what deductible you choose also impacts your premiums. It's a fairly simple formula, but it is one that is rarely explained to the consumer in an adequate way.
So, we are going to set out to demystify the components of automobile coverage so that you can be properly equipped to not only evaluate your current policy, but certainly make sure that if you switch insurance companies, that you are getting the same or better coverage for less money, as opposed to less coverage for less money.
The first component we will talk about is Personal Injury Protection (PIP), and in the coming weeks, we will dissect each of the other components so that you know what you’re getting when you purchase car insurance.
Essentially according to the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1, et. seq., in the event of an accident, your own automobile insurance pays for your own medical expenses if you are injured as a result of a car accident. That means, if you are injured after getting involved in an accident, and you need to see a physician or get a test done, your own automobile insurance policy will process the payment if the treatment is pre-authorized. Certainly, there are limitations on this based on certain coverages you purchase. The standard amount is $250,000 per person per accident for anyone injured in the automobile accident in your household. However, many times insurance companies will try to drastically lower your premiums by selling you less coverage stepping it down to $125,000, $50,000, and even as low as $15,000. In our practice, we have unfortunately seen too many people opt for the $15,000 PIP option, and when they do get injured, they are stunned to know the $15,000 worth of PIP coverage is hardly enough to properly seek treatment and diagnostic testing. After these sums are exhausted, the individual is left to have to pay these bills out of his or her own pocket or seek another source such as health insurance. Many physicians will not treat a patient if they are not assured that there is a source for payment.
This brings me to the next and perhaps largest "switch" that the automobile insurance companies try to push on their customers. Many times insurance carriers will try to have you choose "Health Insurance Primary" option which essentially means that your health insurance will be your primary medical coverage if you are involved in an accident. Think about it: the insurance companies pay a lot of money with regard to medical bills and diagnostic testing on behalf of their insureds who are injured in car accidents. If they can get their customers to choose that the customer's health insurance will be the primary coverage for post-accident medical expenses, then in most cases, the automobile insurance company will save a significant amount of money. What the insurance companies do not tell you, is that if you do have health insurance and it is established pursuant to Employee Retirement Income Security Act of 1974 (ERISA), then the health insurance carrier has a right to be reimbursed for the money that it spent for your medical treatment. This essentially means that before you ever see a dollar of your recovery as a result of a personal injury lawsuit, you will have to pay the health insurance company back the amount that they paid for your medical bills. This is called a “Health Insurance Lien.” This is startling to many people who are always surprised and somewhat disappointed that their net recovery is substantially reduced due to this option.
Ultimately, automobile insurance companies have different methods in which they can get a consumer to choose less coverage to make it look like they are saving the customer money when in reality they are just simply giving the customer less insurance.
Stay with us in the upcoming weeks as we continue to flush out the different ways insurance companies manipulate the components of your automobile insurance policy in order to make you think that they are saving you money when they are simply just giving you less.
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