Archive for the ‘Auto Insurance’ Category

Most people do not think much about their auto insurance, except when they have to pay the premium, usually every six months. Of course, if you have a claim, you will have to think about your coverage.

This month, I want to “walk” you through the typical auto insurance policy in New Mexico.  I will tell you what it contains, and, as always, my opinions.

Auto insurance is really not one insurance. Most policies have a number of different coverages in it. You can pretty much pick and chose what coverages you want, although your agent will probably urge you toward “full coverage”. (I wonder why that is?)

Liability Coverage
The most important coverage is “liability coverage”. This is the coverage that protects you if you cause an accident and someone is hurt or damaged. Most companies break this coverage down into three numbers, such as $25-$50-$10 (which is the minimum amount of liability required by law here). This means you have $25,000 bodily injury coverage for each injured person, up to a maximum of $50,000 bodily injury coverage per accident (called an “occurrence” in the policy), no matter how many people you injure. The “10″ in $25-$50-$10 coverage means $10,000 in property damage liability coverage per accident.

Many people pay the small increase in premium to step up to larger liability limits, such as $100-$300-$50 or even more. Given the cost of health care and of replacing a wrecked SUV these days, you may want the peace of mind of more than the minimum liability coverage.

Uninsured Motorist Coverage
This is the most unusual coverage in your auto policy, mainly because its terms are spelled out in the New Mexico Statutes (NMSA 1978, Sections 66-5-301 to 303). Insurance companies have a very difficult time changing and restricting this coverage because the terms of the statute define your coverage, no matter what the policy’s language is. I think this drives insurers a little crazy.

Uninsured Motorist coverage (called UM coverage in the business) does just what it says. You are hurt or damaged by a person who does not have auto insurance. Your UIM coverage acts like as if the bad guy had liability coverage. This is good for you. The coverage is quite inexpensive and your company cannot raise your rates because of an UM claim.

The bad is that your own company becomes your adversary. They will be trying to show that the accident was not the other guy’s fault or that it was your fault. This is because UM coverage only pays you if the bad guy’s insurance would pay you if he had insurance. If the accident was not the bad guy’s fault, your UIM coverage does not apply.

By the way, it does not matter at all whether or not you were in a motor vehicle for your auto UM coverage to apply. The only test is whether or not liability insurance for the bad guy would apply to your damages. For instance, an uninsured driver missed a stop sign and ran into the front porch of a person’s house. The homeowner made claim on his own auto policy’s UM coverage. His insurer said ‘no way’. The New Mexico courts said ‘way’. If the driver had auto insurance, it would have paid to repair the porch out of the property damage liability coverage, so the homeowner’s UM coverage pays for the porch.

By law, UM includes “underinsured motorist coverage ”. The “underinsured” coverage covers you if the responsible driver has liability coverage, but not enough to pay for all of your injuries and damages. If your own UM coverage amount is higher than the amount of the responsible driver’s liability coverage, you can use your own UM coverage to the extent it exceeds the responsible driver’s liability coverage.

(For example, if the bad driver only has the minimum $25,000 liability coverage and you have more than that in UM coverage, say you have $75,000 UM coverage, if your injuries and damages exceed $25,000, you first collect from the bad driver’s insurer and then collect for the rest of your injuries and damages over $25,000 and up to an additional $50,000 from your UM insurer. You cannot add your coverage to the liability coverage, so it is not $25,000 liability coverage plus your $75,000 UM coverage for a total of $100,000 coverage. You only get up to the total of your UM coverage, so its it total coverage in this example of $75,000.)

UM also includes coverage if you are the victim of a “hit and run” accident. The “hit and run” coverage applies if you are injured or damaged by a vehicle that does not stop, so you do even know who hit your, yet whether or not he has insurance. It is automatically presumed that the missing driver was uninsured, because from your viewpoint, he sure was not insured, given you cannot find him.

Some insurers put language in their UIM coverage that says there must be actual physical contact between the disappeared driver’s vehicle and you for the “hit and run” coverage to apply. But, the courts have found that the UM statute has no such requirement. So, even if you are not hit, you are covered if the driver disappears. An example of how this can happen is when a vehicle next to you veers into your lane and runs you off the road, but does not hit your vehicle and keeps on going.

Many of us are frustrated and upset that so many drivers are irresponsible and do not pay for auto insurance. That is wrong and those drivers should be caught and lose their license and vehicle registration until they are insured and stay insured. Our legislature passed a law like that. It requires auto insurers to inform the New Mexico Motor Vehicle Division (“MVD”) of who is insured and if an insured’s coverage is canceled or lapses.

Some politicians say all these uninsured drivers cost us insured drivers a lot of money. This makes sense, but is not true. Think of these facts. You could never have it to where you would not need UIM coverage at all. As long as there were even just a very few uninsured drivers anywhere in NM or who just drove into NM from elsewhere, you would need to protect yourself with UM coverage. But you say UM rates would cost a lot less then. It ain’t necessarily so. First of all, when is the last time an auto insurer lowered premium rates without being forced to? Raise rates, yes, lower them, no.

Second, if all these irresponsible uninsured drivers suddenly bought auto insurance, your UM rate might drop a little, but your liability coverage rate would definitely go up a bunch. That is because rates are set for the whole “ rate risk pool”. Once those irresponsible drivers are included in the rate pool with the rest of us, liability rates will go up. Why? Because irresponsible people cause a lot more accidents than the rest of us, and now the rest of us in the “pool” with them will have to pay for all those increased liability claims the insurer receives.

With UM coverage as it is now, the uninsured driver is not protected, only you are. In fact, after your insurer pays your UM claim, it sues the uninsured driver and gets a judgment against him and pulls his drivers license and car registration until he pays your insurer back for what it paid you.

Medical Payments Coverage
This coverage, called “med pay” in the business, pays your medical bills if you are injured in an accident. Most policies cover the named insured and your household members if any of you incur medical bills because of a motor vehicle accident. Also, anyone injured while riding in any of your insured vehicles is covered. Med pay coverage does not care who caused the accident.

Medical Payments coverage is not very expensive, but I do not have it myself. This is because I have good health coverage, which has to pay my medical bills if I am injured in a motor vehicle accident. If you collect from the other driver’s liability coverage, you have to reimburse your insurer for what it paid under your med pay coverage. I think this is really unfair, given that you paid your premium for this coverage. They do not give you your premium back.

Collision And Comprehensive Coverages
Do not ask me why these are two different coverages. A cynic might believe it is so the insurer can charge you two premiums, but I would not say that. These coverages pay for the cost of repairing or replacing your own insured vehicle if it is damaged. Collision coverage applies if your vehicle is damaged in a collision and comprehensive coverage applies under other circumstances, including vandalism.

Towing And Rental Car Coverages
These coverages really are not worth even the relatively little premium each cost. If the other driver is at fault, his insurance, or your UM coverage, will pay for the cost of towing your vehicle and a rental car while your vehicle is repaired. If you belong to AAA, then the towing coverage duplicates what AAA is supposed to cover. There are times when these coverages can help you, but I do not think it is cost effective to buy these mini-coverages.