Insurance: The Myth of “Full Coverage”

The myth of “Full Coverage” explains well that no one really has full coverage. Many people, when they buy a car, follow the salesman’s advice and go looking for “full coverage”. What do they really needed?

The bank (or car salesman) that that tells you that you need “full coverage” really only cares that you have comprehensive and collision coverage to fix the car if it is damaged with a maximum of $500 deductible. They don’t care if you even carry liability coverage - but the state does, so those are your minimum. From there you can add more coverages, primarily to protect you, your family, and your assets. You should have more than the minimum, carrying coverages such as Personal Injury Protection (PIP) and Uninsured Motorist.

There is a popular myth if you have purchased “full coverage” from your automobile insurance company, you will be covered for anything and everything when an automobile accident occurs. It is only after a collision that the myth of “full coverage” is soon replaced by the reality of “insufficient coverage.”

Even if a client purchases Liability, Comprehensive, Collision, PIP, and Uninsured Motorist they not “fully covered” for as the article states they now just have “some coverage” in each area. Most insurance agents try to avoid using the term “full coverage” because of this confusion and it really is not important whether you have “full coverage” or not - the important thing is to have enough coverage.

• Liability Scenario: If you cause a major accident or slide on the ice and take out a city light pole at $150,000, who will pay for it? You (by selling your home) or your insurance company?
• Medical Scenario: If someone hits you and has insurance, then their insurance will pay but does not have to pay until you settle the claim. That could take months or even years. Who pays the doctors and hospitals in the meantime? Your health insurance from work usually will not pay for it because the other guys insurance is ‘primary’ and they will pay (eventually). Personal Injury Protection (PIP) on your policy will pay now (up to $10,000 or $35,000 per person depending on what coverage you have) and wait to get reimbursed from the other insurance company.
• Disability Scenario: If you are hurt in a car accident and cannot work for 2 or 3 months (or more), who will pay your groceries and your mortgage? PIP in Washington can cover them. The $10,000 limit, in addition to medical coverage, will pay a maximum of $200 per week. The $35,000 limit will pay up to $700 per week. I don’t know about you but with only $200 week (or less with no coverage) either I would loose my house or the kids would not eat.
• Uninsured Motorist Scenario: If the guy who hits you has no insurance can you just suck it up and wish him the best while you or a family member were maimed or killed? If he had no insurance there is probably not much use suing him since if he had any money he probably would have had insurance too. You could have the court garnish his wages - and get $100 a month for the next 35 years, if you are lucky and can keep track of him.

Hopefully the above examples painted some pictures as to why you need to be “adequately covered”.