Insurance World

I don’t sell car insurance, but as a lawyer practicing in the field of personal injury I frequently see people suffer because they have the wrong insurance coverage. Often, this happens because they purchased directly from an insurance company instead of an independent broker.

Many of my clients who have been seriously hurt in a car accident were struck by someone who had no insurance or only the minimum liability insurance coverage, which is $25,000 in New York and much less in many other states. Unfortunately, many of my clients were sold insurance policies with liability limits of $100,000 or $300,000, but were not sold matching uninsured and underinsured coverage.

Just this week, yet another new client had this problem. My client was a pedestrian crossing the street when she was struck by a car which fled the scene. The driver was caught shortly after leaving the accident, but the owner of the car only has the New York State minimum liability insurance of $25,000 and my client has serious injuries consisting of many broken bones including a fractured arm, leg and skull.

My client owns a car with liability insurance limits of $300,000, but she purchased the insurance from GEICO whose salesperson didn’t sell her underinsured coverage. GEICO does not use independent insurance brokers, but sells insurance directly to consumers through in-house sales agents.

For a small fee, my client could have purchased underinsured coverage of $300,000 which would have allowed her to recover $300,000 for her injuries instead of $25,000. Ironically, she did not need the $300,000 liability coverage to protect her assets. However, since you cannot buy underinsured coverage higher than your liability coverage, I would have advised her to purchase $300,000 liability coverage for the sole purpose of being able to purchase $300,000 underinsured coverage.

I have had many clients in this situation who lost their jobs because of serious injuries and incurred substantial debt. If they had matching underinsured coverage, the additional money available to pay their claim would would be a big help to pay their bills and get their life back together.

Underinsured motorist coverage will pay you money from your own automobile insurance policy if you have been hurt in a car accident by someone who was negligent for causing your injury and who had less liability insurance coverage than you did. Uninsured motorist coverage will pay you when the other car did not have any insurance coverage or the identity of the other car is unknown.

Underinsured and uninsured coverage is inexpensive and usually available in limits that match your liability insurance coverage. It is not available in amounts greater than your liability insurance coverage.

Underinsured and uninsured coverage is so important that a couple of states now require coverage limits matching your liability insurance limits, unless you decline the coverage in writing. Several years ago, I suggested to several New York State senators that they enact a similar law in New York.

I have also seen many clients who were not sold the maximum medical payments insurance, which costs me only $2.01 per month on my car insurance policy. This is particularly important for people who do not have a good health insurance policy. It is also beneficial for passengers who do not have health insurance.

Why should you buy car insurance through an independent insurance broker? The courts have defined the reason. There have been several “malpractice” lawsuits against insurance companies for failure to offer underinsured and uninsured motorists coverage limits matching the liability limits. However, when the insurance company sells directly to consumers, these cases have gone in favor of the insurance companies. The courts found that when a consumer buys insurance directly from an insurance company, rather than an insurance broker, the consumer is only buying insurance and is not paying for advice.

When you buy auto insurance from an independent insurance broker who represents several different insurance companies, you get the advantage of an insurance professional who can evaluate your needs and advise you accordingly. Additionally, only an independent insurance broker can provide you with a choice of insurance companies and premiums, so you get the best coverage at the lowest price.

Whether you buy your car insurance directly from an insurance company or through an independent insurance broker, always make sure that you purchase matching uninsured and underinsured motorist coverage and the maximum medical payment benefits.

For some reason I always seem to receive a lot of mail this time of year on the subject of “Life Insurance”. Most want to know the benefits or pitfalls of Term Life Insurance over Permanent Life Insurance.

Term Life Insurance is by far the most cost effective way of securing a life insurance policy available to the general public. Term Life Insurance covers a specific period of time - normally the policy will run for periods of 5, 10, and 20 years. As the age of the insured increases, the cost of the premium will increase. Premiums are calculated on the mortality rate, which is usually dependent on the persons age, sex and whether that person uses tobacco.

This type of policy allows the insured or the owner to pay a set premium for an agreed period. The Insurance company provides monetary benefits to the beneficiary in case of death of the insured during that period. Usually, the benefits received on the death of the insured is income tax free.

There are four parties in term life insurance: (1) the owner is the one who pays the premium; (2) the insured is the one on whose death, a death benefit (face value) will go to the beneficiary; (3) the beneficiary is one who will receive the proceeds of insurance on death of the insured; and (4) the insurer is the company providing the insurance. Depending on the Insurance company you choose, the premiums can be paid monthly, quarterly or annually. For example, Fred pays $50 dollars monthly to XYZ Company for insuring the life of Margaret (his wife) for a period of 10 years. Should Margaret die during the 10 years of the agreement, XYZ company will pay $25,000 to Joe (son of Fred and Margaret). Here the insured is Margaret, the owner of the policy is Fred, the beneficiary is Joe and the insurer is XYZ Company. If Margaret does not die during the 10 years, XYZ Company will not be liable to pay any money to any of the parties involved. Often the owner and the insured are same. That is, a person buys a policy to cover his own death and nominates a beneficiary. Husbands and wives often insure each other in case of death.

What is Term Life Insurance? It is a legal contract with terms and conditions and assumed risks. Sometimes there can be special provisions in the agreement like suicide terms, wherein on suicide of the insured, there is no benefit accrued to the beneficiary. Term Life Insurance is based on two concepts: (1) theory of diminishing responsibility and (2) Buy Term and Invest the Difference (BTID). With Term Life Insurance, the responsibility or liability of the insuring company reduces as the policy reaches its maturity. What makes Term Life Insurance the most cost effective type of insurance available to the public is that there is no cash value at the end of the period. Studies have shown that the mortality rate in Term Life Insurance can be as low as 1%. Hence the concept of BTID.

Rather than going for permanent life insurance (where on the expiry of the agreed period, the owner will accrue some cash benefit and there is a savings component in it) it is considered cheaper to buy term life insurance and take care of the savings components by investing in other areas.

With the present market giving good returns on investments, buying a term life insurance is a more attractive option than permanent life insurance.

Have an opinion or a question you would like me to answer, then write me! http://www.CarlHampton.com