Will your auto insurance protect you if you're in an accident?

Automobile accidents are a common, everyday occurrence. Body-shop repair bills, totaled vehicles, physical injuries, medical expenses, and lost wages are also common consequences of these accidents.

If you are at fault in an automobile accident and cause property damage or bodily injury to someone else, your auto liability insurance will pay for that property damage and pay that person to compensate him for his injuries.  However, if a judge or jury awards that person more than your liability policy limits, you will be responsible for paying any amount awarded in excess of the policy limits.  This is known as the risk of excess exposure.  But if you're the person who was injured because of someone else's fault, this is known as the risk of an underinsured motorist.

Louisiana's minimum auto insurance requirements might leave you exposed if you're injured by someone who is underinsured or if your liability insurance coverage isn't enough to pay for damages your fault causes.

Liability Coverage

Louisiana's compulsory automobile liability insurance law requires owners of automobiles to purchase certain minimum amounts of liability insurance: (1) $10,000 per person; (2) $20,000 per accident; and (3) $10,000 for property damages.  This is commonly referred to as "10/20/10."  Of course, you can always purchase higher limits of liability coverage such as 25/50/25 and 100/300/100.

When an at-fault-driver in an accident has 10/20/10, the maximum amount his insurance will pay for someone else's injuries is $10,000 per person and $20,000 per accident and up to $10,000 for property damage.  In other words, under 10/20/10, regardless of how severely someone is injured, his insurance will not pay more than $10,000 to any one person and regardless of how many people are injured, the total amount his insurance company will pay will not be more than $20,000.  As for the property damage, the insurance company for the driver at fault will not pay more than $10,000 for the damage to the other car even if it needs $15,000 in repairs.

Medical Payments Coverage ("Med Pay")

Unlike your 10/20/10 liability coverage that pays for someone else's damages, Med Pay is an optional coverage you can add to your own auto policy to pay for your own medical expenses.  Med Pay will pay for medical expenses you incur for injuries you suffer in an automobile accident regardless of who is at fault.  It applies to every dollar of covered medical expenses up to the policy limit you purchase; there is no deductible. 

Med Pay usually functions as a way to cover medical expenses that you would otherwise have to pay out of your own pocket as part of the deductible of your health insurance plan.  That's why the typical amount of coverage for Med Pay is only $5,000. 

Uninsured/Underinsured Motorist Coverage ("UM")

UM Coverage is also an additional insurance coverage you can add to your own auto policy at your option.  UM can compensate you for all types of damages, including lost wages and out-of-pocket expenses.  It applies to the amount of damages you have that are in excess of the liability limits of the person who causes your injuries.  For example, if you have $20,000 in damages but the at-fault-driver has only $10,000 in liability coverage, your UM would pay you the additional $10,000 to fully compensate you.  One of the limitations on purchasing UM coverage, however, is that you can't purchase UM coverage with limits higher than your liability limits.

Because UM coverage plays an important role in compensating people who are seriously injured in accidents, the law requires that you sign a UM rejection form with your insurer if you choose to NOT have UM coverage.  If you didn't sign a rejection, you will be entitled to UM Coverage even if you didn't pay for it.

Conclusion

Purchasing the right types of auto insurance coverage is just as important as purchasing the right amounts of coverage.  You should visit with your insurance agent to make sure you have done both to eliminate surprises and easily-avoidable pitfalls.