All About Insurance

After thirty-four years in practice, I’ve seen a lot of things and I’ve learned a few things. Some are South Carolina Law. Some are myths and some are legends. Some are customs and some are norms. All were learned over my career as a lawyer helping people who have been in car crashes. So let’s start with the basics and some of the more common questions I get.

WHY DOES INSURANCE EXIST?

Insurance is an invention of the modern age to spread the risk of loss over a great many people by sharing in the potential losses. This was started in the shipping industry centuries ago when the loss of a ship and its cargo were common. (They did not care so much about the crews of the ships) A group of business owners in London decided to “pool” their money by placing a percent of the value of the ship and cargo into a common account. If a member company’s ship sank, they got the value of their ship even though they only paid a small percentage of its value into the common fund. The other members got nothing back, but next time it might be their ship. That’s how the risk began being shared by the group. Modern insurance works the same way. You pay a premium of some small percent of your potential losses and if you have a wreck, the insurance company pays your claim. Well, not always, but that’s the principle behind insurance anyway.

THE MYTHS OF “FULL COVERAGE”

South Carolina law requires that we carry statutory minimum insurance on our cars and trucks (really any vehicle that is licensed and designed for highway usage). What is that you ask? Some people and even some insurance agents refer to this as “Full Coverage”. The statutory minimum is far from “full coverage”, but is the minimum you have to have on your motor vehicle to be legal. I’ll explain, but first, we need to understand a few definitional items:

Minimum Coverage: South Carolina minimum statutory insurance.

Optional Insurance: Insurance that is above the state minimum coverage, but may be required by the lien holder on your car.

Liability: Insurance that insures you for your negligent or wrongful acts.

Uninsured: Mandatory insurance coverage that applies when you are injured or damaged by an at-fault driver who has no insurance.

Underinsured: Optional insurance coverage you purchase that comes into play when you or someone in your car is injured or damaged by an at-fault driver who does not have enough insurance to cover your damages.

Bodily Injury: A component of your policy that provides insurance for those who are injured in a motor-vehicle-related event.

Per occurrence: The total amount of insurance available for all people and property injured or damaged in a crash.

Aggregate: The total insurance coverage available as often seen in a large commercial or single-limit policy.

Property damage: Insurance that pays for damage to a vehicle.

Comprehensive: Optional insurance coverage that covers damage to your car caused by such things as theft, fire, or one-car accidents.

Collision: Optional insurance that repairs or totals your car if you are at fault in a crash or if the other insurance carrier is dragging their feet.

Med Pay: Also known as “medical payments insurance”, an optional insurance that will pay for your medical bills. It is sold in various amounts such as $1,000.00, $5,000.00, etc.

First-Party Coverage: Insurance you pay for to protect yourself.

Third-Party Coverage: Insurance the other driver has that pays if they are at-fault for the wreck.

Gap coverage: Insurance you can oftentimes purchase that fills the “gap” between what you owe on your car and what its value might be if it is totaled in a wreck.

Umbrella Policy: Also known as “excess insurance”, is Insurance that kicks in after your initial policy is exhausted. Coverage is normally in increments of $500,000 and are only sold if your underlying policy has a minimum of $250,000 in liability coverage.

ACV: Actual cash value: this is the value of your car if it is totaled in a collision.

Insured: You or any permissive-use driver under your policy.

PIP: Personal injury protection: optional coverage sold in various amounts that will pay for medical expenses as well as wages you might lose while out of work.

Combo Policies: Insurance that covers your home and autos. Often times cheaper when purchased together than separately.

No-Fault: Not sold in South Carolina, but is in some surrounding states. This coverage transfers the payment of any damages received in a crash to you the driver regardless of “fault”, rather than place it on the negligent driver. This generally favors the insurance companies and severely limits the amount you can recover.

Declarations page or “dec” page: The page or pages in your insurance policy that set out the coverage you have purchased.

AND THE ANSWER IS:

Now that you are familiar with the insurance “lingo”, let’s discuss what it really means.

A typical minimum-limits policy will appear as follows:

Liability: 25/50/25

Uninsured: 25/50/25

This is shorthand for $25,000 in bodily injury coverage per person injured as a result of your negligence/$50,000 total for all people injured by your negligence/ $25,000 total for damage caused to another’s car as a result of your negligence.

The same explanation applies to the uninsured coverage.

I know this is confusing, so I explain it this way in a somewhat extreme example. Assume a driver hits a busload of people and fifteen people are severely injured or some even die. Under the minimum-liability limits above, no one person on the bus can collect more than $25,000 and there is only $50,000 in insurance total to be divided among all of the passengers.

Likewise, there would only be $25,000 in insurance to repair the damaged bus. This example might help you understand why the statutory minimum or “full coverage” is far from full. Such a policy “fully” exposes you and your assets in anything other than a minor to moderate collision.

HOMEWORK TIME

Now that you have a better understanding of insurance, I would like for you to look at your declarations page and check your coverages. If you can increase your limits then you should do so. One of the most often overlooked and valuable additions to your policy is underinsurance. Again, that is insurance that you buy that kicks in when the other at-fault driver does not have enough insurance. It is relatively inexpensive to add and when you need it, you really need it. Add it.

After reading this section if you have any questions or would like a review of your policy by one of our attorneys, please call me at 1-800-531-9780 or email me at mchappell@csa-law.com with the subject line: POLICY REVIEW.