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April 29, 2010
"I buy insurance because the law requires it."
The State of Utah requires registered vehicles have Liability coverage.
Liability Coverage – people purchase this coverage to protect themselves from having to pay out of pocket for bodily injury or property damage they cause to other people.
Bodily Injury is separated into two categories.
- Special Damages – injury/damage that is treatable and billable. In order for these damages to be paid by the insurance company, a bill with a “specific” dollar amount must be presented.
- General Damages – injury or damage for which it is not possible to bill and is generally not treatable. Pain and suffering, inability to perform, loss of consortium are examples of general damages.
- Property Damage – whatever property, not owned by the insured, that is damaged as a result of negligence by the insured. The damage must be caused by an auto driven by the insured and can include damage to: autos, structures, contents, etc. of others.
In order for liability coverage to be paid to a claimant, the person or entity bringing suit/claim, the insured must be found negligent – at fault for the damage. In order to be found negligent, four things must occur:
- The insured must have a duty to act or not to act as a reasonably prudent person would act or not act.
- The insured must have breached that duty.
- A resulting loss must occur
- The breached duty must be the proximate cause of the loss – meaning there must be an uninterrupted chain of events from the breached duty to the loss.
Each state has minimum Liability limits required of registered vehicles. The state of Utah requires registered vehicles carry the following liability coverage:
$25,000 Bodily Injury Liability per person
$65,000 Bodily Injury Liability per accident
$15,000 Property Damage Liability
Jane Doe has state minimum liability limits – 25/50/15. She has been found at-fault in an auto accident in which she rear-ended another vehicle. The other vehicle was occupied by a man and a woman and a child. The man’s bodily injuries (both special damages and general damages) total $30,000, the woman’s bodily injuries total $10,000 and the child’s bodily injuries total $10,000.
Jane’s insurance company will pay, in Jane’s behalf, $25,000 for the man’s injuries (Jane is $5,000 underinsured in regards to the man as she only has $25,000 per person, but caused the man $30,000 damage) and $10,000 each for the woman and the child respectively. If the total bodily injury between the man, woman, and child exceeded $50,000 then the insurance company would have to offer the three individuals amounts that collectively equal no more than $50,000.
In addition to Liability coverage, the State of Utah requires registered vehicles to have Personal Injury Protection coverage.
Personal Injury Protection (PIP) – people buy personal injury protection to protect themselves from having to pay out of pocket for injury sustained in an automobile accident. PIP coverage is also referred to as “No Fault Coverage”. Regardless of who is at fault in an auto accident, your insurance company pays for your injuries and my insurance company pays for my injuries. Once fault has been decided, one insurance company may reimburse the other.
Jane Doe is driving west through an intersection in which she believes she has the right-of-way. John Doe is driving south through the same intersection and he believes he has the right of way. Jane and John collide in the middle of the intersection. Both Jane and John get out of their vehicles screaming at the other asking why the other didn’t yield the right of way. After a short while, both Jane and John realize they are injured and as a result both are taken to the hospital for treatment. After receiving treatment, both Jane and John call their respective insurance companies to notify them of the accident. Both Jane and John file claims with their respective insurance companies because Jane’s company will pay for her injuries and John’s will pay for his injuries.
After several days of investigation, it is determined that John had the right-of-way and therefore Jane is found to be at-fault/negligent. Both Jane and John had duties to maintain: yield the right-of-way, obey traffic devices, maintain a proper lookout and possibly others. Jane breached one or all of those duties and as a result of the breach caused John damage. Any monies paid by John’s insurance company for his damage can be subrogated and recovered from Jane’s insurance company.
In order for John to collect general (non-economic) damages from Jane, his special damages must exceed $3,000. The state of Utah requires a Tort Threshold be met before one party can sue another for general damages. The two most common types of tort thresholds are a Monetary Threshold and a Verbal Threshold. Monetary threshold is expressed in dollars of medical costs incurred and verbal threshold is expressed in definitions of the severity of the injury. The monetary threshold in the state of Utah is $3,000. The verbal threshold is usually an injury that results in a whole or partial loss of a body member or function.
Each state has minimum Personal Injury Protection limits required of registered vehicles. The state of Utah requires registered vehicles carry the following minimum PIP coverage:
$3,000 Per Person
Other than Liability Coverage and Personal Injury Protection, all other insurance coverage is optional. (While this is true in Utah, other states may have other required coverage and/or limits.) If your answer to the question, “why do you buy insurance” is “because the law requires it” then you should verify with your policy that you haven’t purchased any other coverage. It’s very common to find other coverage such as towing, comprehensive, collision, un-insured and under-insured on policies – even though these coverage’s are not required by law.
If you have chosen to purchase any optional coverage, then by your actions you are stating your answer to the question “Why do you buy insurance” to be, “because you want protection”.