Making Sense Out of Your Auto Insurance

Most Arizonans over the age of 18 drive automobiles or ride motorcycles.  Hopefully, the majority have insurance coverage on the vehicles they drive.  We get copies of our insurance policies in the mail or on-line, but those policies are filled with confusing terms we may not fully understand.  This article is an attempt to explain what those terms mean to you and why it is important for you to know what coverages you have and what additional coverage you may need.

Arizona law requires all motorists to have minimum liability insurance on their vehicles, but many drivers opt for more extensive coverage.  The wise driver wants to protect himself, his passengers, and his vehicle in addition to protecting other drivers he may encounter on the road.  Thus, the majority of us have full coverage on our cars and trucks, but we may not know exactly how those coverages work.

Some states in the country are “no fault” states.  Arizona is not one of them.  In the “no fault” states, your auto insurance pays the claim no matter who is at fault for the accident, and drivers may be prohibited from suing each other.  In contrast, Arizona follows the traditional tort system.  If the other driver is at fault for the accident, you make a claim against his insurance.  If the claim is not settled, you can sue the other driver.  If there is a dispute over which driver is at fault, their insurance companies often arbitrate the dispute before a neutral party.  The arbitrator examines the evidence and decides which driver caused the accident.  If the insurance carriers invoke the arbitration clause in the policy, the arbitration is binding.  The two insurance companies and their insureds must abide by the decision.  There can also be instances where both drivers are partly at fault, and the two insurance companies must sort out percentages of fault.

Now, let’s look at the coverages normally seen on our auto policies.

Liability Coverage

Liability coverage protects you when there is an accident and you are at least partly at fault.  Arizona law requires all vehicles to be insured with at least the minimum liability coverage.  Currently, the minimum required coverage pays up to $15,000 for injuries to a single person, and it pays up to $30,000 if multiple people are injured.  This minimum coverage also includes up to $10,000 for property damage.  These 15/30 limits may be sufficient if you are at fault in a fender bender, but in the event of a serious accident, you would find yourself critically underinsured.  

For example, traffic stops suddenly in front of you.  Because you are momentarily distracted, your reaction is delayed.  You then try to change lanes to avoid rear-ending the car in front of you.  Failing to see the motorcyclist in the next lane who is slightly behind you, you clip his bike and send him flying.  The motorcyclist sustains a fractured pelvis, right arm and elbow fractures, and a broken femur.  The new Harley is totaled. You will be cited for this accident and determined to be at fault.  The motorcyclist’s injuries and the property damage will far exceed minimum coverage.  He will be entitled to compensation for his medical bills, his pain and suffering, his lost wages for the 3 months he is unable to work at his construction job, and any other damages he suffered because of the accident.  He will also be awarded the cost of replacing the Harley.  If you do not have enough insurance to pay his claim, the motorcyclist may sue you to recover his damages.

If you drive a beater car and have no money, job or assets, that may not be an immediate problem.  As the old saying goes, you can’t get blood from a stone.  However, the motorcyclist can still sue you, obtain a judgment, and record that judgment.  If he is diligent, he will renew that judgment every 5 years.  The day may come when you get a job and want to buy a car or a house. Yet, that judgment will be on your credit record, preventing you from getting a loan.  

For most drivers, minimum liability coverage is a bad idea.  If you have a decent job, own real property in addition to your home, have more than one car, have stocks or bank accounts, you need to protect yourself with additional liability coverage.  Most insurance carriers offer liability coverage in increments, the first, of course, being the minimum of 15/30.  Increased limits are offered in fairly standard amounts like 25/50, 50/100, 100/300, and 250/500.

Uninsured Motorist Coverage

You absolutely need to have uninsured motorist coverage.  Uninsured motorist coverage (UM) protects you when the other driver is at fault for your accident, but he doesn’t have any insurance.  Yes, Arizona law requires liability insurance on every motor vehicle, and driving without insurance will subject a driver to legal penalties.  Nevertheless, almost one third of Arizona drivers are without insurance.  When an uninsured motorist hits you, your UM coverage will kick in to pay your medical bills and other damages.  The amount your UM will pay is determined by the amount you purchase.  If you purchase the bare minimum, your UM coverage will cap at $15,000 for a single injury and $30,000 for all the injured people in your car.  The wise driver has enough UM coverage to take care of himself and his family in the event of a serious accident.  UM limits are typically offered in the same increments as those for liability coverage.

Underinsured Motorist Coverage

You can also purchase UIM (underinsured motorist coverage).  This additional insurance offers you protection in the event you are hit by a driver with low liability limits.  For example:  Sue runs a red light and broadsides your car on the passenger side.  She has $25,000/$50,000 liability limits on her insurance.  Your injuries are relatively minor, but Joe, your front seat passenger, sustained air bag burns, a broken nose, a broken jaw, right rib and leg fractures.  One of Joe’s broken ribs punctured a lung causing internal bleeding.  Sue’s 25/50 coverage will not begin to cover the damage.  Her $25,000 may be enough to cover your airbag burns and broken wrist, but Joe’s injuries will require hospitalization, surgery and significant time away from work.  This is where UIM coverage comes into play.  You have 250/500 UIM limits.  Once Sue’s liability limits are exhausted, your UIM will pay up to $250,000 to cover the rest of Joe’s damages.

While your insurance rates may go up if you are at fault for an accident, Arizona law will not allow an insurance company to raise rates if you use your UM or UIM coverage.  Arizona Revised Statutes, Section 20-263 (A).

Medical Payments Coverage

Medical Payments Coverage is insurance that pays accident related medical bills.  Medical payments limits are usually low, anywhere from $1000 to $10,000.  Medical payments coverage is often used to cover expenses that your health insurance will not cover.  Health insurance companies often place strict limits on some types of health care. Services like chiropractic care or physical therapy are often subject to limits on the number of visits you can have.  If you need additional physical therapy or chiropractic care, medical payments coverage can be used to pay those expenses.  The rates and terms for medical payments coverage vary from one company to another.  

Insured Person

It is important to know who is covered by your insurance policy.  Of course, any individual named as an insured on the policy is covered. Your minor children are also covered persons.  Additionally, anyone driving your vehicle with your permission will be considered a covered person. If someone steals your car and drives it, that person will not be covered by your policy.

Collision Coverage

Collision is the coverage for accident related damage to your vehicle.  Collision coverage will repair or replace your vehicle, less your deductible, no matter who caused the accident.  If the other driver was at fault, your insurer will first pay to fix your car; then, it will go after the other guy’s insurance company to recover its money.

Comprehensive Coverage

This coverage protects your car from damage caused by something other than a collision.  For instance, fire damage, hail damage, and flood damage are events covered by your comprehensive section of the policy. A severe dust storm can bring rocks and debris that damage cars.  That type of damage would be covered by comprehensive coverage.

Windshield Coverage

Everyone who drives in Arizona needs windshield coverage. With our dusty, rocky soil, most drivers have experienced a rock hitting their windshield and quickly spreading to a major crack. While damage to glass is generally covered under the comprehensive portion of your policy, it is subject to your deductible.  With deductibles commonly between $250 and $1000, many Arizonans opt to buy full glass coverage on their vehicles.  Full glass coverage pays to replace your windshield with no deductible charged.  

Things to Consider

When you purchase motor vehicle insurance, there are many options and many considerations.  Do your homework and think carefully before you buy.  There are some questions you may want to ask your agent or insurance representative.  Does your auto insurance cover you when you are driving a rental car?  You want to know if you need to pay for that extra insurance from the rental company.  Do you have coverage that pays for a rental car in the event of an accident?  Do you need that coverage or does your family have 2 cars?

Car accidents are far too common in our state.  You need to protect yourself and your family from disaster the best way you can.  If possible, you should buy both uninsured and underinsured motorist coverage.  If you have assets to protect, make sure your liability insurance is sufficient to protect those assets.  If you have questions, talk to your agent or someone at your insurance company.




This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

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