First and Foremost:
“Limited Tort “Option:
Pennsylvania has adopted the “Limited Tort” Option. This Option limits your right and the right of members of your household to seek financial compensation for injuries caused by other drivers. Under the Limited Tort form of insurance your recovery for injuries sustained by yourself or other household members is severely limited. Although you may seek recovery for all medical and other out-of-pocket expenses, you may not sue for pain and suffering or other non-monetary damages with some exceptions. You or other members of your household may only sue for pain and suffering if your injuries fall within the definition of “Serious Injury” as set forth in the policy. The definition of “Serious Injury” has been narrowly interpreted and would exclude, in most instances, injuries such a broken arm, broken leg, “whiplash injury”, rib fractures and other injuries that would not leave a person permanently impaired.
While the “Limited Tort” Option is slightly less expensive then the “Full Tort” Option, you must clearly be aware that you are giving up some of your rights to sue in exchange for a relatively low premium reduction.
“Full Tort” Option:
An insured in Pennsylvania also has the option of choosing “Full Tort”, which if chosen, you and other members of your household maintain an unrestricted right to seek “full” financial compensation for injuries caused by other drivers. Under this form of insurance, you and your household members may seek recovery for all medical and other out-of-pocket expenses and may also seek financial compensation for pain and suffering and other non-monetary damages as a result of injuries caused by other drivers.
While the annual premium for “Full Tort” is higher than for “Limited Tort”, this option should be seriously considered when purchasing or renewing an insurance policy.
In many instances, while the pain, suffering an inconvenience caused by injuries such as a broken arm or leg, whiplash or other bodily fractures are not considered “serious injury” under Limited Tort, the pain and suffering and inconvenience associated with such injuries can be quite substantial. In many or most cases involving injuries in an automobile accident, the recovery available under this Option far exceeds any savings realized in selecting Limited Tort. Carefully consider this Option when purchasing or renewing your insurance policy.
Understanding Other Areas of Your Automobile Insurance Coverage
Pennsylvania, as well as many other states, mandates that an automobile owner purchase auto insurance for at least a State-mandated minimum. In Pennsylvania this minimum is $15,000 for injury to one person and $30,000 for all injuries caused by an incident. A basic auto insurance policy is comprised of six basic types of coverage, some of which are required by State law, while others are optional. The various types are:
- Bodily Injury Liability;
- Property Damage Liability;
- Personal Injury Protection (PIP);
- Uninsured/Underinsured Motorist;
- Collision; and
Liability coverage is required in Pennsylvania and in most states. If you are at fault in an accident, your liability insurance will cover the cost of bodily injury and property damage caused to others involved in the accident, as well as the cost of your legal bills associated with the accident. It is extremely important to consider the amount of coverage you are able to afford, keeping in mind that if the injuries and property damages caused by you exceed the amount of the coverage you purchased, the injured parties may sue you for the difference between the total damages incurred and the amount your insurance company pays.
Property Damage Liability Coverage falls within the Liability Coverage which you are required to purchase. While Property Damage Liability Coverage usually repairs damage to the other driver’s vehicle, it can also cover damages to things such as lamp poles, fences, buildings, or anything else that you may have struck.
As Liability insurance is the foundation of most auto insurance policies, careful attention must be paid to be sure that you have enough coverage to avoid a short-fall in coverage which would put your savings, investments and other property in jeopardy of being lost. In short, consider being safe rather than sorry.
Personal Injury Protection (PIP)
Personal Injury Protection (PIP) is required coverage in Pennsylvania. Personal Injury Protection will pay your medical bills to the extent of your coverage when injury occurs as a result of an accident while you are driving your car, someone else’s car (with their permission), and the injuries you or your family members incur as pedestrians. Additionally, PIP may cover other expenses that are related to injury in addition to medical, which include lost wages, child care and funeral costs. Ordinarily, if you have a good health insurance plan, there may be little need to buy more than the minimum required. However, there are exceptions to this general rule. PIP Coverage is relatively inexpensive and a rather small premium purchases substantial coverage in the event of injury and lost wages. When your automobile insurance carrier pays your expenses and lost wages, they are not entitled to recover the payments made to you should you make recovery against another driver who was responsible for your accident. On the other hand, if your medical bills have been paid by your Health Insurance Company, the amounts paid on your behalf may have to be paid to that health insurance company or disability insurance company that made payments on your behalf. Primary examples of payments made which must be reimbursed include payments made by Medicare, Medicaid, Public Assistance Benefits, and payments made by Health Insurance Companies through employer provided health insurance (ERISA). The right of these health care providers to recover is often times referred to as a subrogation interest.
This concept is best understood with an example: You are injured in an automobile accident and the sum of $50,000, the amount of your coverage, was paid to your healthcare providers under your PIP Coverage. You then seek recovery against the driver who was at fault and are awarded a settlement or a verdict in the amount of $100,000. In this example, the entire settlement or verdict is awarded to you with no responsibility to make any payment whatsoever to your auto insurance company for what it may have paid.
However, let’s assume the same injuries and a recovery of $100,000 with medical bills of $50,000. You have purchased PIP coverage of $10,000. Your medical bills of $50,000 were paid by your automobile insurance carrier to the extent of your $10,000 coverage. The balance was then paid by Medicare or your company-provided health insurance (ERISA).
In this example, you have no responsibility to repay your automobile carrier the sum of $10,000 it expended. The sum of $40,000 must, however, be reimbursed to Medicare or your ERISA health benefit provider before you are entitled to receive any monies as a result of your injuries. Therefore, you will only receive $60,000 of the $100,000 recovery made with the sum of $40,000 being paid to Medicare or ERISA health care in reimbursement.
The amount of PIP coverage you purchase should be carefully considered in light of the foregoing examples.
Uninsured/Underinsured Motorist Coverage
Like Personal Injury Protection (PIP), Uninsured/Underinsured Motorist Coverage protects you and your family when injured in an automobile accident which was not your fault. When seen in this light it is easily recognizable that this form of coverage is extremely important. While Liability Insurance Coverage is mandated by State law at a minimum amount, please recognize that many individuals drive vehicles without the required insurance or with only the minimum $15,000 coverage. In the event that an accident causing injury to you is caused by an uninsured motorist, unless you have uninsured motorist Coverage, you cannot make any recovery for your injuries except through your own uninsured motorist Coverage. Of course, you retain your right to sue the party at fault, however, if they were driving without insurance, it is very unlikely that they would have any assets with which to provide compensation to you. Uninsured Motorist Coverage also comes in to play if you are struck and injured by a hit and run driver.
Underinsured Motorist Coverage (UIM) often comes in to play in Pennsylvania accidents as the Commonwealth of Pennsylvania only requires a driver to carry $15,000 in liability insurance. In today’s economy and with the cost of medical care, the $15,000 required Liability Coverage is quickly exhausted. In such an event an injured insured who was not at fault can turn to his own insurance carrier to cover the difference in damages between the $15,000 provided by the underinsured driver and the amount of coverage you carry with your own insurance company. As an example, if you sustain injuries for which you are entitled to $100,000 in compensation , you would be entitled to receive $15,000 from the at-fault driver’s insurance company and the balance of $85,000 from your own insurance company if your Underinsured Coverage was $100,000.
It should be obvious that Uninsured and Underinsured Coverage is extremely important to you and your family and high coverage limits should be considered. Be reminded, however, that uninsured and Underinsured Motorist Coverage can only be purchased in an amount equal to the Liability Insurance Coverage that you purchase for your vehicle. From a cost standpoint, carrying high Liability Coverage and equal amounts in Uninsured and Underinsured Coverage is a wise financial choice. Remember that the Liability Coverage of your policy is very reasonable and limits can be raised to a higher level without a substantial increase in your premiums.
Collision Coverage will pay to repair your vehicle if you cause an automobile accident. This coverage typically covers the actual cash value of your car, which is not the same as the car’s replacement cost. Collision Coverage is normally the most expensive component of auto insurance. The cost of Collision Coverage can be reduced by choosing a higher deductible, which is the amount you will pay out-of-pocket before your insurance company is required to make additional payment to you. As Collision Coverage is very expensive, you should carefully consider if the purchase of Collision Coverage, which is not required by Pennsylvania, is the right choice for you. Remember that should substantial damage occur to your older model auto, the insurance company may well conclude that it will “total” your car. If the cost of repairs exceed a certain percentage of the car’s worth, you will only be paid the actual cash value of your car and not its replacement cost. If you have an automobile which has an actual cash value of $1,000 and a deductible of $250, the most that you can expect to recover from your insurance company is $750. Your yearly premium costs in this situation could exceed the amount that you could recover.
Comprehensive Coverage will pay for damages to your car that were not caused by an auto accident, such as theft, fire, vandalism, natural disaster or hitting a deer. Comprehensive Coverage also comes with a deductible and your insurance company will only pay up to the amount the car was worth at the time the car was damaged. Comprehensive Coverage is not a required coverage under Pennsylvania law.
While Collision and Comprehensive Coverage are not required under Pennsylvania law, when you finance a car, your lender may require that your purchase Collision and Comprehensive Coverage as part of the loan agreement. Please remember that if your car is financed you will be required to pay the total amount you owe to the finance company notwithstanding that you may no longer have use of the vehicle.
The above information is not intended to be exhaustive with regard to automobile insurance coverage in Pennsylvania. However, if it provides some answers to questions regarding your insurance coverage, it has served its purpose. In conclusion, please know that insurance companies will charge different premiums for the same coverage. It is important to determine exactly what coverages you would like to purchase and in what amounts and then check the premium being charged by a number of insurance companies to be sure that you receive the coverage you desire at the best possible cost.