If you are confused about what auto insurance benefits are and what you might need, you are not alone. Many law students and lawyers do not understand the types of insurance available. Here are the basics on the types of insurance, how they apply, and why you should consider buying the coverage.
What: PIP stands for Personal Injury Protection. It covers medical expenses and a small amount of lost wages if you are out of work for more than two weeks. Benefit limits range from $10,000 to $35,000.
How: PIP is also called “no fault” coverage because it applies regardless of whether or not you were at fault. For example, it does not matter if you were rear-ended or run yourself into a tree–PIP applies. If you are struck by a vehicle while walking or riding your bike, the other driver’s PIP, as well as yours, will apply in most instances. If you are a passenger in a vehicle involved in an accident, the driver’s PIP should apply to you.
Why: Even if you have good health insurance, PIP offers additional benefits. First, there is no coinsurance or copay for treatment. Second, there is no annual insurance deductible, so for example, you do not need to incur $2,500 in covered medical charges for benefits to kick in. Third, PIP covers treatment many health plans exclude or limit, such as chiropractic care and massage therapy.
What: Liability insurance is mandated by Washington law. The minimum requirement is $25,000.
How: Liability insurance pays when a driver’s negligence injures another person.
Why: Because it’s the law.
What: UIM stands for Underinsured Motorist. Benefit limits typically range from $100,000 to $500,000, though some policies exceed $1,000,000.
How: UIM coverage applies if the at-fault driver has no insurance, which is unlawful in Washington, flees the scene (also unlawful), or lacks sufficient insurance to pay the full value of the claim. There are several major distinctions between UIM and PIP. First, UIM is not “no fault” coverage. Your UIM insurer “stands in the shoes” of the at-fault driver, and you are only entitled to recover damages under a UIM policy that you would have been entitled to receive from the at-fault driver if he had sufficient liability insurance. Second, UIM does not just cover medical bills and wage loss (what we call economic damages), but also pain and suffering, emotional distress, and loss of enjoyment of life (what we call noneconomic damages). Third, a UIM insurer is entitled to defend the merits of the claim. For example, if liability is disputed, or if the insurer disagrees about the value of general damages, they can force you to sue or arbitrate to determine the amount of damages.
Why: Remember that not all drivers have or can afford more than the $25,000 minimum liability insurance, which barely covers the average whiplash injury claim. If you are seriously injured by such a driver and have no UIM coverage, not only will you not recover the general damages you are entitled to, you may not recuperate the cost of coinsurance and copays.
Other Types of Insurance:
Comprehensive: This typically refers to coverage for property damage to your vehicle or another vehicle involved in an accident.
GAP Insurance: Cars depreciate in value rapidly in the first few years. If you purchase a car new and do not put much money down, and the car is subsequently totaled early in its car-life, you may owe the lender more than the “actual cash value” or “replacement cost” payable under your auto insurance policy. GAP insurance covers that remainder.