Tuesday, June 13, 2017

Why Basic Auto Insurance Policies are not worth the money if you are ever in an accident.

I have been telling clients of mine, usually after they have been sued in an auto accident, not to waste time buying a “basic policy” instead of at least a standard policy and hopefully a standard policy with more than minimum coverage. People are being deceived, even on television commercials, into believing that by buying a basic policy they are insured. Yes, they receive an insurance card that they can show a police officer or a court as evidence of insurance coverage. But if you are ever in an automobile accident, either as a victim or as a perpetrator, you may find yourself sadly under covered by your insurance. If you are sued for personal injuries by another driver, you will find that your policy will not cover you or provide you with legal representation, unless you got the “optional” liability coverage. And if you have injuries and you sue the other driver, if they lack necessary coverage, you will find that you cannot get under/uninsured motorist’s coverage on your policy. And your so-called optional liability coverage is only for $10,000.00, so if you are sued, the most the insurance company will pay in your defense is $10,000.00 but at least they will represent you. While insurance regulations require insurance companies to inform purchasers of these basic policies that they will not have legal representation without the optional liability coverage, I have not found one client who came to me who at least applied for that minimal coverage. And it is doubtful that the brokers that sell these policies are explaining the risks.

In a standard policy, medical treatment under PIP (Personal Injury Protection) insures that recipients get treatment and that doctors are reimbursed based upon defined schedules for medical care. (New Jersey Administrative Code, NJAC 11:3-4.2.  Deductibles and co-pays are defined under the law although additional coverage may be available. While some people may choose to use their health insurance instead of their auto coverage if they are in an accident, the one benefit of PIP coverage is that fee schedules are mandatory. That means a doctor or hospital can only bill you for what PIP’s schedule will pay for. The health care provider can charge you in excess of what your regular health insurance provider may pay. The benefit in using your health insurance though is that you will often have greater access to treatment without being challenged by the PIP provider as to unnecessary treatment.

The basic policy offers PIP coverage for the insureds only up to $10,000; and members of their families up to $15,000 and up to $5,000.00 for property damage coverage. Unless you have the optional liability coverage (up to $10,000) you are on your own if you get sued. As the basic policy should state in its provisions: the policy “may subject the named insured to a claim or judgment for noneconomic loss which is not covered by the basic or special automobile policy, and which may place his assets at risk, and in the event the named insured is sued, the insurer shall not provide legal counsel.”

If you have a basic policy, your coverage booklet should contain the following information: https://www.csg-inc.net/pdf/CSAA/CSAA-NJ-BP-1-New-Jersey-Basic.pdf
Even worse is the special policy. This is a policy to provide coverage to low-income people who are on Medicare and whose licenses are in good status. This is the so-called $1 a day policy. While this policy may keep you from going to court or even jail if you get stopped by the police or are in an accident, it is virtually useless if you are sued, or if you yourself are the victim of an accident and need treatment before what Medicaid is going to afford under the terms of the special policy. And again, if you get sued, you are on your own.

The State is at fault for encouraging drivers to have these types of policies. Insurance really was meant to provide coverage for the victims of automobile accidents and these policies fail to do that by not providing liability coverage. Yet they are being touted by insurers, even on television, as a way of proving that you have insurance coverage. The legislature should go back to the drawing boards and either remove these policies or require that they provide at least some form of liability coverage. As an attorney who has represented a number of drivers involved in accidents who thought they were “covered” I can say that they find that they either have to pay for their lawyers themselves or try and file for bankruptcy because they are usually going to be sued for money they do not have. Or they risk having a judgment against them that can be on their record for years to come.

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