Ten with Ben – Episode 6: Car Insurance Companies and Associated Nightmares

Hi, I’m Attorney Ben Schwartz,

Today we are going to answer a question from Greg. Greg sent an email and he said, “after watching your videos and reading your blog posts, I hate insurance companies, but I am legally required to have it. What car insurance company do you recommend and what are some ways I can protect myself from some of the nightmares people go through?”

Let me take that in reverse order. First let’s talk about some of the nightmares that people go through after a car accident.

  1. Rental Coverage. One of the most prevalent problems that I see after a car accident is that people cannot get around. They cannot get to work, they cannot get to their doctor’s appointments, because their car is in the shop. The reason they cannot get around is because they did not by rental coverage. When you look at your insurance policy, if you pull out your declarations page and you don’t have rental insurance coverage you should call your insurance company or call your agent and find out how much is it going to be to add rental coverage. Usually you are talking about just a couple of dollars. Really there is no reason not to buy rental coverage. If you are in an accident and you are short on cash because you cannot go to work and you need to get your to your doctor’s appointments 3 or 4 times a week, you are going to need a rental. So buy rental coverage, that is the number one thing you can do to make life easy on yourself in the event you are in a car accident.
  2. GAP insurance. I see cases in my office all the time where people buy a car, they take out a loan on the car, they are driving around and they get hit by someone. Let’s say they get hit by a drunk driver or an inattentive driver, their car is totaled. If they did not buy GAP insurance, sometimes they are left with thousands of dollars that they have to pay out-of-pocket to their loan company. Now the way this works is this, let’s say you go on Monday to the car dealership and you buy a car. Let’s say that you pay $10,000 for it and you drive off the lot. That car is not worth $10,000 anymore it is a used car now and maybe it is worth $8,500, but you took out a $10,000 loan on that car. The next day, on Tuesday, you get in a car accident and a drunk driver hits you and totals your car. You have the right to sue that driver for the damage to your car, for the total loss of your car as a matter of fact. But you are not entitled to $10,000, you are entitled to the fair market value of the vehicle on the day of the accident which is $8,500. So now you owe $10,000, but you are only getting $8,500 for your vehicle. Who makes up the other $1,500? The answer is, you do. It comes out of your pocket. The solution to that is when you buy a vehicle, whether it is new or used, ask for GAP insurance. Pay the premium on the GAP insurance, pay it as part of the loan to buy the car. That way if this situation happens, you’ve got a $10,000 car, you’re driving the car, it gets totaled and on the day of the accident it’s worth less than what you paid for it. The GAP insurance will pay the difference between what you recover from the at-fault driver’s insurance company and what you owe to your bank.
  3. Collision coverage. You should buy Collision coverage even if the car isn’t worth that much money. The reason I say this is because if you are in a car accident and your car is totaled or your car is damaged, maybe it’s worth $3,000 or $5,000 or $7,000 maybe it’s not a brand new Rolls-Royce, but what you have to understand is if you have been injured in an accident you may not be able to go to work and earn money to go get a new car. If you have Collision coverage on your auto policy, your insurance company will pay you the fair market value of the car or your insurance company will pay for your car to be repaired. Some people say will wait a minute, if I am in an accident and it is somebody else’s fault shouldn’t their insurance company pay for the repair of my vehicle or shouldn’t their insurance company pay to replace my vehicle? The answer is maybe, but they are not required to. You have the right to sue the at-fault driver and their insurance company will pay the damages award you get against the at-fault driver. But the at-fault driver’s insurance company is not your insurance company and they are not legally required to step up to the plate in the days or the weeks after the accident and make you whole, pay for your loss of your vehicle, pay for the repairs of your vehicle so buy Collision insurance to cover that. Buy Collision insurance coverage on your own vehicle.

Two other things:

  1. PIP (personal injury protection), in some states it is called med pay, in some states it is required and some states it is not. If I were you, I would buy it and I would buy as much as you can reasonably afford. This is the type of insurance that covers medical expenses after a car accident. You want to have as much as you can reasonably can afford. If you are relying on your health insurance to pay your medical bills after a car accident, you may have co-pays and deductibles. You will have to pay out of pocket and when you are not working, because you are injured, creates a real situation for people that don’t have PIP or personal injury protection on their auto policy.
  2. The last thing I think you should do is buy as much uninsured motorist insurance coverage as you can. If you are in a car accident, it is caused by someone who was inattentively driving, their checking their text messages, run a red light and smashed into you and you are injured. Come to find out that bad driver had no insurance. Instead of suing them and getting nothing because they had no insurance, what you are going to do is make a claim with your insurance company for uninsured motorist benefits. What you would have gotten in your personal injury case against that bad driver, you will now get from your insurance company. I buy as much uninsured motorist insurance as my insurance company will sell me, that is a million dollars. That might not be appropriate for you. Maybe you need more, maybe you need less. It is a conversation you should have with your insurance agent or insurance company representative. You should find out how much it cost or whether you can buy an umbrella with UM coverage. Find out what the cost of it is and make a decision for your own self and your own family. The more the better if you want my opinion.

Now the first part of the question, Greg, was what insurance company do I recommend? I do not recommend any particular insurance company. To me, I fight with insurance companies all the time. I cannot say buy insurance from this one and not from that one. I can tell you is the better the insurance company you go to, the better a chance you are going to have coming out unscathed dealing with the insurance company after a serious wreck. I would stay away from any insurance company that is advertising to save you money. I would go to an independent insurance broker and talk to them and find out what the best insurance companies are. They can sell and then buy insurance, not from the cheapest, but from the most reputable.

I’m attorney Ben Schwartz and I hope you enjoyed this Ten with Ben video. If you have questions for me like this, Greg this was a great question, send me an email. Thanks for watching.

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