When thinking about insurance, many people do not give it the attention it truly deserves. Whether it's your homeowner's insurance, auto insurance, or even life insurance, price tends to be the motivating factor when you are deciding on your premiums.
Let me tell you a story that many of you in the Seattle area may be familiar with.
On October 28th, two friends of mine were coming out of a concert. They were crossing the street when a drunk driver struck them and three other pedestrians. The driver had a blood-alcohol limit four times the legal state limit. One of my friends was in critical condition, suffering head and back trauma and broken bones. She remained in the hospital and required brain surgery. Thankfully she is doing much better now. However, the drunk driver is adding more stress to the horrible incident.
The driver was not only drunk, but she was also driving without insurance. My friend works for her family business so like many family-run businesses, she does not have medical insurance. The high cost of healthcare is well known in the United States. Even with medical coverage, hospital bills have sent many families into a financial crisis that they could not overcome. Although she was the victim, she has to pay for her medical expenses on top of healing from her physical and mental injuries.
Had the driver been insured, her auto insurance would have covered some of the costs (depending on the elected coverages). Liability insurance (which is required), would have provided coverage for bodily injury to my friend. My friend's auto insurance may provide some financial assistance if she chose to include personal injury protection but the basic coverage amount is only $10,000. But even if she had the highest coverage amount of $50,000, it would not be enough to cover her medical expenses.
I understand that responsibility is something that not everyone cares too much about. People do stupid things all the time (including myself). But that is another topic of conversation that deserves it's own blog post.
The purpose of insurance is to transfer financial risk from yourself to your insurance company.
Think about it for a minute...
You have insurance so that if you are at-fault (or you are not), you won't have to pay for the damages. Fixing a car, paying for someone elses medical bills, or repairing your home is not cheap. However, just because you have insurance doesn't mean you are safe.
Let's take a look at a fictious auto insurance policy for John Responsible:
John has the state minimum requirement for liability coverage. A liablity policy covers bodily injury (BI) and property damage (PD) formatted as [BI limit per person]/[BI limit per occurrence]/[PD per occurrence]. Since John has the state minimums, his liability coverage is $25,000/$50,000/$10,000.
Unfortunately, John causes an accident on I-5 (he is at fault). He was following too close when the car in front of him slammed on their brakes. The driver of the other vehicle suffered a broken hip and legs. He drove a 2005 Honda Accord, which was totaled.
Does John have enough liability coverage to pay for the damages? Probably not. $25,000 is not enough to pay for the surgeries and hospital stay. $10,000 is definitely not enough to replace the car. In this example, John's coverages are not high enough to pay for the damages. Once the case closes, John's insurance company will go after John for the difference. The insurance company can garnish his wages, sue, and/or put a lien against his property.
John has to deal with this mess just because he wanted to save $50 a month on his auto insurance. And my friend has to deal with thousands of dollars in medical bills because the drunk driver didn't even have insurance.
My message is, please consider not only your potential financial loss, but also the harm that can be caused to another party. This goes for homeowners (having proper liability coverage) insurance and business policies as well. Think about obtaining an umbrella policy to provide maximum protection against loss. $1 million umbrella policies are inexpensive (usually $150 a year). If you don't know much about umbrella policies, ask your insurance agent. Sit down with your insurance agent and review your coverages to make sure that you are properly insured. When choosing an agent, make sure that your agent can explain the in's and out's of your policy.
The holiday season is fast approaching. Please do your part to ensure that your family and the family of others get to share it with joy.
Side Note: We are planning on a 5k run at Greenlake to raise funds to help pay for my friends medical bills and to raise awareness about the dangers of drunk driving. If you would like to make a donation, be a sponsor, or participate, please email me at kkang@amfam.com.
Thank you for reading my lengthy post!
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