So far we have run a good race in this long and boring, but oh so necessary discussion about coverage. In the world of insurance claims that I work there is a saying: "Nothing about a loss matters until you have verified coverage." Why? It's quite simple, because if there is no coverage, nothing will get paid.
In talking about coverage there is one area that people like to gloss over, exclusions. Yes, ALL policies have exclusions. Exclusions exclude losses from being covered under a policy. If you are at fault for an accident and have no coverage due to an exclusion, the party who's vehicle you damaged and the individuals you injured will sue you directly. You, personally will be responsible to pay for the repairs to their vehicle or other property, all of their medical bills, attorney fees, and pain and suffering, the cost of which would be set by a court. A judgement of this magnitude could cost you everything! Your house, retirement savings, children's education funds, and anything else of value that you have worked so hard for, it now belongs to someone else! Not only are all your current assets seized, your future earnings are also up for grabs to satisfy this judgement, which may not be discharged, even by bankruptcy. You could be working to pay this for the rest of your life! This is why it is extremely important to read this section of your policy.
To tell you what exclusion there are on your personal auto policy, I would have to read each and every policy. So, I will give you examples to use as guidelines. Please take the time to review your individual policy so that you are educated.
One of the top exclusions is using your personal vehicle for commercial purposes. Why? Your auto policy is a personal not commercial policy. The cost of commercial policies are calculated differently than personal policies. If you are using your vehicle in connection with discharging the duties of your job, please look at your policy and speak to your agent about securing a commercial policy.
Let's look at a few examples you may not have considered. First, your teenager gets a job delivering pizzas and gets in an accident. Surprise! There is no coverage on this loss, and because he is a minor you are responsible! Using a vehicle listed on your policy to deliver pizza part time would, under most policies, exclude you from having any coverage. So, if you are delivering pizza, either stop it or get a commercial policy. In our second example, you take a job as a nanny and one of your responsibilities is to pick up the kids after school and get them to all of their activities. You get in an accident while taking little Jane from school to piano lessons, she is hurt and so is the other driver. You got it, there could be no coverage! You are on the hook for all the repairs and doctor bills and other costs as described previously. If you are using your vehicle for any commercial purposes you might as well be driving around with no insurance coverage.
Your insurance company has a copy of an application you either filled out, either in person or you answered the questions over the phone when you spoke with a representative. Somewhere in the application process is written or will be read to you: Any false, misleading or incomplete information you provide resulting in the carrier looking at paying for an at fault loss which they shouldn't will fall under the Exclusion clause of you written agreement with you carrier. This is why you should be completely open and honest when applying for insurance.
A common area where an exclusion may result has to do with people who live with you, and at the time you got your policy were not identified and listed on your application with your carrier. Let's say your application asks you to list all household members age 14 and over. You have a 14 year old son, but don't provide that information to your carrier. One night your 14 year old angel gets your keys and takes off in your car with his friends and gets in an accident. The damage to your vehicle, the other driver's vehicle and the injuries may not be covered by your policy! Why? Simple, you didn't provide the information to your carrier when you first had chance to, so they will use the Member of household, but not listed driver defense. I know this because, well I've used it before. Then once again, you my friend, will be directly sued for the damages.
If you have a change in members of your household let your carrier know as soon as possible so that they don't get you on a surprise exclusion due to your failure to notify them. This would include any teenagers receiving a learners permit, an adult child moving back home, or any long term house guest such as your niece coming to stay for the summer. If you are in doubt about whether a living situation may or may not affect your coverage, contact the carrier and let them make the determination ahead of time.
Another common are where an exclusion may result. Let's say you are a stay at home parent and let you sweet neighbor, sibling or friend use you vehicle regularly, even once a week. Now, that sweet person gets into an at fault accident. The carrier will use the Frequency Usage of Vehicle defense and you will suffer the same fate as in the prior paragraph. So, do NOT let people use any of your vehicles with any frequency, or you may turn out to be one unhappy camper.
Some policies exclude everyone other than the people listed on the policy, period! NOBODY ELSE, NO MATTER WHAT REASON OR EXCUSE YOU GIVE!!!! This is most common with a cut rate insurance company.
The best rule of thumb is to not let anyone, other than those listed on the policy, ever drive the vehicles listed on your policy. Most policies allow someone to use your vehicle once or once in a while but if any pattern begins to develop, bring it to a halt at once or you may regret it. Another idea is to email customer service a clearly explained situation about someone using your vehicle on your policy and how often it may be getting used (ie: x number of times per week or per month) and for how long usage is expected to go on. Ask them to forward your email to Underwriting and have Underwriting email you an answer. What is the purpose of going through all this hassle? If your carrier changes their mind you have an email as proof of their original answer and it may bind the carrier to cover the loss should they change their minds later. Print it and place a copy with your policy. An old trick I learned long ago, a quick email may one day save your hide, I know it has me on more than once occasion.
Here is another example where you might get blindsided with an exclusion. Your sister who has a suspended or revoked license can't get insurance. (Hmm, I wonder why?) She asks you to put her vehicle on your policy, being the helpful person you are, you agree. Her vehicle is involved in an at fault accident and your carrier runs a VIN check and discovers it is registered to someone else. They confirm this through you or the legal owner. Do you think your carrier is going to cover this accident? You are right, NO, they are not! Why not? You can not insure something you don't have a legal interest in. So, take a guess what happens to your friends or loved ones in that at fault vehicle? Nothing good. You carrier will use the, Non-insurable Interest defense, and there is no coverage. They are really in a mess now! A quick word to the wise, if your name is not on the title, don't insure it on your policy. Trust me, we have ways of finding these things out! (Insert evil and sinister laugh)
Wasn't that was fun? No?!? Well hopefully you at least learned something. If you have any general questions, leave them in the comments and I will get an answer posted. If you need an answer asap, contact your carrier directly. Tune in next time when we discuss the myth of "full coverage", you don't miss that one, it will be a gem!
Your mission this week, should you choose to accept it, review your auto policy looking for the term "full coverage".
As always if I can help you in anyway contact me at villarrealinsuranceservices.com
Manny
Saturday, April 21, 2012
Monday, April 2, 2012
Auto Coverage 101 Part 3
OK folks, we are continuing the definition of coverages this week. Please stay with me as this one is BORING, but it can keep you from loosing money you are entitled to if you know how to use it so pay attention.
Personal Injury Protection (PIP) and Medical Pay (Med Pay), while these coverages have some similarity, they are very different. PIP and Med Pay are usually sold in 2,500, 5,000 or 10,000 amounts with 10,000 being the max amount sold in Texas.
PIP usually is used to pay for medical bills and lost wages. It may also be used for domestic assistance, if you are the main person doing the housework. Check with your carrier on this as each carrier may differ. To use it for medical bills, an assignment of benefits form needs to be signed by you to the medical provider you want to use your PIP. The medical provider(s) will spare no time to use it till there isn't anything left as medical providers seem to view PIP or Med Pay as a slush fund.
Med Pay pays for medical bills but it may not pay for lost wages so check with your carrier as carriers differ on this. To use your Med Pay to pay for your medical bills, you must sign an assignment of benefits with the medical provider you want to use your Med Pay benefits or you submit your medical bills directly to your claims department, not your agent.
Please note-If you want to file a PIP or Med-Pay claim yourself, call your claims department and tell them you want to open a PIP or Med-Pay claim and will be sending them bills needing to be paid or tell them a medical provider will be sending your claims department medical bills that you want paid. Yes, you have to speak that directly to your claims department or your bills will sit in a file which will eventually get closed.
While you are filing a claim on your own policy benefits, your carrier does have the right to investigate the facts and circumstances of your claim to make sure they should be paying out on the claim.
PIP extends to the insured, listed additional drivers on your policy, passengers in your vehicle and to listed members of your house hold. It may also extend to people you allow to use any of your vehicle that are not members of your household. Check with you carrier as carriers differ on this.
PIP usually cost more than Med-Pay and there is a good reason. If you are in an auto accident and recover any money from the other drivers carrier and have Med-Pay, your carrier will get all the money they paid out on your medical bills back, it's called Subrogation, leaving you little or nothing. That's why Med Pay usually cost less than PIP. With PIP, if you use it and recover any money from the other drivers carrier, none of that money is touched by your carrier to reimburse them. Now, do you see the advantage of PIP to Med-Pay?
In Texas, if you submit your medical bills to your PIP, you can also submit them to the drivers carrier, if you are a passenger in a vehicle that carries PIP on their policy. While it looks like your getting paid twice on the same bills, you are. Only the great state of Texas could come up with such genius. I guess that why our legislature only meets every other year.
If I had a choice between PIP and Med-Pay, I always would go with PIP.
Attorney's and PIP/Med-pay are a very bad combination. Do not EVER let an attorneys office handle your PIP or Med-Pay benefits for you. Here is why, they will usually charge you a 10% fee to do the same thing you can do, forward your bills to your carrier for payment. So, if you have 10,000 in PIP or Med-pay, you will only have $9,000.00 to use because your attorney took $1,000.00 for themselves as a fee. So, now how helpful are they really being?
Personal Injury Protection (PIP) and Medical Pay (Med Pay), while these coverages have some similarity, they are very different. PIP and Med Pay are usually sold in 2,500, 5,000 or 10,000 amounts with 10,000 being the max amount sold in Texas.
PIP usually is used to pay for medical bills and lost wages. It may also be used for domestic assistance, if you are the main person doing the housework. Check with your carrier on this as each carrier may differ. To use it for medical bills, an assignment of benefits form needs to be signed by you to the medical provider you want to use your PIP. The medical provider(s) will spare no time to use it till there isn't anything left as medical providers seem to view PIP or Med Pay as a slush fund.
Med Pay pays for medical bills but it may not pay for lost wages so check with your carrier as carriers differ on this. To use your Med Pay to pay for your medical bills, you must sign an assignment of benefits with the medical provider you want to use your Med Pay benefits or you submit your medical bills directly to your claims department, not your agent.
Please note-If you want to file a PIP or Med-Pay claim yourself, call your claims department and tell them you want to open a PIP or Med-Pay claim and will be sending them bills needing to be paid or tell them a medical provider will be sending your claims department medical bills that you want paid. Yes, you have to speak that directly to your claims department or your bills will sit in a file which will eventually get closed.
While you are filing a claim on your own policy benefits, your carrier does have the right to investigate the facts and circumstances of your claim to make sure they should be paying out on the claim.
PIP extends to the insured, listed additional drivers on your policy, passengers in your vehicle and to listed members of your house hold. It may also extend to people you allow to use any of your vehicle that are not members of your household. Check with you carrier as carriers differ on this.
PIP usually cost more than Med-Pay and there is a good reason. If you are in an auto accident and recover any money from the other drivers carrier and have Med-Pay, your carrier will get all the money they paid out on your medical bills back, it's called Subrogation, leaving you little or nothing. That's why Med Pay usually cost less than PIP. With PIP, if you use it and recover any money from the other drivers carrier, none of that money is touched by your carrier to reimburse them. Now, do you see the advantage of PIP to Med-Pay?
In Texas, if you submit your medical bills to your PIP, you can also submit them to the drivers carrier, if you are a passenger in a vehicle that carries PIP on their policy. While it looks like your getting paid twice on the same bills, you are. Only the great state of Texas could come up with such genius. I guess that why our legislature only meets every other year.
If I had a choice between PIP and Med-Pay, I always would go with PIP.
Attorney's and PIP/Med-pay are a very bad combination. Do not EVER let an attorneys office handle your PIP or Med-Pay benefits for you. Here is why, they will usually charge you a 10% fee to do the same thing you can do, forward your bills to your carrier for payment. So, if you have 10,000 in PIP or Med-pay, you will only have $9,000.00 to use because your attorney took $1,000.00 for themselves as a fee. So, now how helpful are they really being?
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