Insurance Policies -- Part One

Today I met with a client in my office.  She was very reluctant to sue, and was reluctant to even come into my office to discuss making a claim against someone else.  She felt guilty about it.  My client, I'll call her "Ann" was hurt because someone had taken a drug known as R-2, and had crossed over the center line, slamming into Ann.  Still, Ann was guilty to be in my office talking about suing someone.

I then jumped up on my soapbox and told Ann that far from being guilty, she was doing the right thing.  Car insurance, in New York State is mandatory for ALL automobiles operating in New York State.  As a matter of fact, it is against the law to operate a vehicle without insurance.  The reason for insurance?  If someone was careless and you are hurt you will receive fair compensation for your injury, your property damage, your lost wage and your medical expenses.

The very reason for the existence of the insurance policy and the insurance company backing the insurance policy is that if you get hurt, the insurance company will provide compensation.  The insurance industry makes amazing profits, and according to one law firm located in Utah, a recent study revealed that the most profitable auto insurance company in the United States in 2010 was State Farm Insurance, pulling in $1.8 billion dollars. There were several others that weren’t far behind. Farmers Insurance came in at $1.686 billion and liberty mutual at $1.678 billion. Auto insurance profits total in the hundreds of millions to low billions every year. According the American Association for Justice profits for the auto insurance industry as a whole total close to $3 trillion annually.  The fact that these companies have marketed in such a fashion as to make people feel guilty about bringing claims is apparent.  The less claims there are the more money the insurance company makes.  But the purpose of insurance is to help people...or at least that is what it is supposed to be.

I thought that it would be a good idea to describe what an insurance policy is, in general terms -- and why you should read it.  There are many aspects to a policy that you buy for yourself that is worthwhile knowing about just in case you do get into an accident.

The place to start out with in your policy is the DECLARATIONS PAGE.  The declarations page, or what we lawyers call the "Dec page", is usually found near the first pages of your policy.  It lists the named insureds, the address, the broker's or the agent's name and insurance company and the policy limits.

Looking at your own insurance declarations page for your automobile insurance policy you will see an entry for "Bodily Injury" and, sometimes "Bodily Injury and Property Damage", depending on the type of policy.  New York State mandates that all vehicles operating on the roadways have insurance.  However, the minimum policy that is mandated starts at the $25,000 per person and $50,000 per accident level.  What does that mean?  It means that in any given accident caused by the insured, one person is entitled to a maximum amount of $25,000 for non-economic damages, (pain and suffering, and the effects of the injury that do not include loss of wage, medical bills -- those are covered under the no-fault part of a policy described in another post).  If more than one person is injured be it two or five or twenty five, the maximum amount that the policy will pay out including everyone is $50,000.  Thus, if five people were injured and their injuries were similar, the most they could receive would be $10,000.  Now, that is the situation if the policy is the MINIMUM mandated New York State policy.  Policies can, and most often are, purchased in higher amounts for the protection of others.

The reason why you should get as much insurance as you can reasonably afford for the protection of others is so that you know that if you are careless and cause someone serious damage, they will be fairly compensated AND that your coverage will protect your assets should the driver get a verdict for a larger amount than your insurance coverage protects you for.

So your first stop in reviewing your policy is the DECLARATIONS PAGE and the limits for bodily injury and property damage.

In my next post, I'll talk about another part of the declarations page.