Sunday, March 4, 2012

What Does "100/300,000" Auto Coverage Mean?

Not what you think it probably means. In fact, it is kind of misleading.

1. 100/300 Liability Coverage

This means your policy will pay up to $100,000 to ANY ONE PERSON who you injure in a collision that is your fault. If you seriously injure that person and he or she has a claim for injuries greater than $100,000 (say $300,000 for example), your liability insurance coverage will only pay $100,000. You're on the hook out of your pocketbook and assets for the remaining $200,000. So much for the "300" part. Your policy looks a bit thin now.

When does the "$300,000" part kick in? If you negligently injure more than one person in the same car accident. Example: your driving negligence injures 3 occupants. Assume that:

Occupant No 1 has a claim for $300,000;

Occupant No. 2 has a claim for $100,000;

Occupant No. 3 has a claim for $50,000

Result? The most your insurance company will pay TOTAL is $300,000. Occupant No 1 will probably not get all $300,000, and as a result, occupants 2 and 3 may not receive the total value of their claims either. They may all have to share "pro rata" or proportionally in the division of the $300,000 total proceeds available.
Again, so much for your policy protecting you. Your personal assets are exposed in this example too since the total of all occupants' claims ($450,000) exceeds your liability insurance limits by $150,000.

2. 100/300 Uninsured and Underinsured (UM/UIM) Motorists' Coverage

This is the MOST IMPORTANT PART OF YOUR INSURANCE POLICY. Why? Because it protects YOU AND YOUR FAMILY if an uninsured driver (he's got no insurance) or an underinsured driver (he's got minimal or low liability limits) creams you in a crash. Yet, the same "sleight of hand" rules apply.

The $100,000 portion of your UM/UIM is the most your insurance company will pay to any one person insured under your policy. If you're injured by an uninsured drunk driver and have a claim worth $200,000, your insurance company owes you $100,000. By purchasing this coverage, you only get %50 of what your claim is worth.

The $300,000 portion of your coverage? Your getting the picture here, right? You got it: it's the most your company will pay no matter how many family members are injured. If some underinsured driver goes left of center and seriously injures all four members of your family, the most they will pay is $300,000 total, and no more than $100,000 to any individual family member.

When this coverage is fully explained, it's easy to see why "100/300" coverage is so lousy. Yet, we continue to see this coverage over and over, whether it's the negligent driver who injures our clients, or our clients with their own policies.

Although "100/300" coverage is fairly common, it has become outdated like the mullet, untied high top basketball shoes, Lover Boy (which I never listened to by the way) and Members Only jackets (I confess to briefly owning one of these). In any serious crash, a standard $100,000 recovery can be quickly eaten away your health insurance company's "subrogation" rights. If your health insurance company paid $70,000 for your medical bills, in some instances it can get every penny back.

Unfortunately, most agents don't realize this when they convince you to buy a "standard" 100/300 policy. And you don't realize any of this stuff until it's too late.

Hey insurance agents: 1982 is calling. It wants its "100/300" policy back.

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