Understanding the Five Types of Auto Insurance
The term “full coverage” is a misleading term that is often used improperly in the insurance industry. Oftentimes it is used to mean that an insured has the bare minimum coverage as required to obtain a Florida Driver’s License. Many people who currently have a valid Florida Driver’s License are driving every day on Florida roads and highways without sufficient insurance coverage to pay for the medical expenses of others if they are at fault for an accident. That is why every Florida driver should protect themselves by understanding these five types of coverage:
1) Personal Injury Protection (PIP): The bare minimum coverage required in Florida is “Personal Injury Protection,” which is also called “PIP” or “No-Fault” insurance. Unfortunately, most Florida drivers are misinformed and believe that just because they have “PIP” they have “full coverage.” PIP provides coverage to the policyholder of up to $10,000 in medical expenses regardless of the fault of the insured. PIP is paid by the insurance company directly to the doctor, hospital, ambulance, or chiropractor who provides the insured with medical treatment. PIP benefits are only paid directly to the insured for lost time from work and only at a rate of 60 percent of the lost wages.
This type of coverage may seem sufficient to some, however, most of the time it is not. Even a minor accident could result in medical bills and lost wages that exceed $10,000. If this is the only coverage an insured person purchases, they are not fully covered. With PIP, the insured does not have coverage that protects their assets should they be at fault for an accident, does not have coverage for themselves in the event that their medical bills exceed $10,000, and does not have coverage for damage to their vehicle or damage to another’s vehicle. “PIP” coverage is not having “full coverage.”
2) Bodily Injury (BI): Florida law does require all insured persons to carry Bodily Injury Coverage (“BI”). This statute is sometimes called “The Financial Responsibility Law.” Interestingly, Florida law does not require an insured driver to have BI coverage to obtain a Florida Driver’s License. If, however, a driver is at fault for an accident and they do not have BI coverage, they could have their driver’s license suspended for failing to pay the out-of-pocket medical expenses of an injured party. This may seem unfair, especially when the driver believed they were obtaining “full coverage” by purchasing only “PIP” coverage.
Bodily Injury coverage starts at the 10/20 level ($10,000 per person/$20,000total) and can go up to millions of dollars in coverage. If, however, a driver is at fault for an accident and the injured parties’ medical bills, lost income, pain and suffering, and future medical expenses exceed the 10/20 minimum BI limits,the driver could be exposed to seizure of their personal assets in a lawsuit. Therefore, it is important to ensure that the BI limits are high enough to cover and protect the insured person’s personal assets should they be at fault for an accident.
3) Uninsured/Underinsured (UM): Even if an insured has “PIP” and “BI” they still do not have “full coverage.” That is because the insured does not have the coverage necessary to protect themselves in the event that they are involved in an accident with an uninsured or underinsured driver. The most important coverage any insured should have is called uninsured/underinsured coverage, or “UM”. Typically, UM coverage matches the BI coverage an insured elects to have. An insured can also elect stacking or non-stacking UM coverage.
Stacking UM coverage means that if the insured has more than one vehicle being insured and they have 100/300 in UM and BI, the UM coverage would be multiplied by the number of vehicles being insured. For example, an insured has three vehicles and elects to stack their UM, they now have three times, or 300/900 in UM coverage. That means that if the insured is involved in accident and is not at fault – he or she could be entitled to the BI of the at-fault party as well as $300,000 in UM benefits and, if un-stacked, $100,000 in UM benefits.
I cannot stress enough the importance of obtaining UM coverage before an insured is involved in an accident. Drivers can protect themselves by having UM coverage in the event they are involved in an accident with an uninsured/underinsured motorist.
4) Property Damage/Collision: There are other important insurance coverages, such as property damage and collision, which every insured driver should have. Property damage pays for the damage to another’s vehicle, while collision covers damage to a person’s own vehicle in the event the at-fault party does not have coverage or the insured is the one at fault.
5) Medical Payments Coverage: There is also medical payments coverage, which covers medical expenses not paid for by PIP. This coverage is also important.
In conclusion, there is no true definition for the phrase “full coverage.” It could mean obtaining just enough coverage to protect your assets in the event you cause an accident and just enough coverage to be able to compensate yourself if you are injured due to someone else’s negligence. It is clear, however, that you should have PIP, BI, UM, Property Damage, and Collision at the very least. Having all five coverages is the closest to actually having “full coverage.”
Learn about more about automobile accident legal services.
Disclaimer: This post is not intended to create an attorney-client relationship and is simply intended to provide information regarding auto insurance coverage. It is not a complete explanation but a summary regarding a specific topic of auto insurance coverage. Many details are excluded from this summary with the intent of brevity.