Auto insurance limits

Factual Questions
1

I live in the UK. As far as I know, when you insure yourself on a car here, you are insured for any and all claims that may arise with no limit.

So when I visited America and rented a car, I was amazed to see in the documents that I was insured up to $3,000,000 in injury, $1,500,000 in damage to property etc.

These sound like big numbers but they are really not. Injury claims in particular could be huge - supposing I slipped onto a busy sidewalk full of people.

How come it’s considered ok in the U.S. to run around basically totally underinsured? Supposing I caused $100,000,000 of injury - would they come after me and my property for the excess above 3 million? And once they’d got that, would the rest of the injured parties be out of luck? How is it decided who gets the $3,500,000 we’re probably talking about here?

The thought was certainly enough to make me feel pretty nervous about driving. I became a live risk analyst.

Also, possibly a harder question for SD given it’s US-centricity, but I’d be interested to know if I’m actually wrong and the UK does have similar limits.

Thanks!

2

In Michigan, we have unlimited medical coverage. I mentioned it in another thread, and rachelellogram replied, saying only Michigan does that. She felt Michigan’s approach was awful, but if you’re the one seriously injured, I think you’d appreciate the continuing coverage over the alternative.

3

I think it’s easier and cheaper all the way around to just declare bankruptcy once you hit a certain amount

4

Unless the gov is taking up the slack, which seems to be your UK case, there has to be some limit to how much the insured is required to pay so the premium can be calculated.

One man’s underinsurance is another’s over-. I am not an actuarial, but I’ll bet you could check the claim tables and arrive at a value that would cover, say, 99% of all claims. That might be a reasonable amount to have.

5

Three million is high. I remember back in the 1980’s a local Canadian newspaper ran a cautionary tale about auto insurance in the USA. Some fellow from Canada was sunning himself on a beach in Florida when an idiot in a vehicle drove over him. (You can drive on some Florida beaches) Turns out the driver was from some hillbilly state like Kentucky or somewhere, and the requirement there at that time was for minimum $25,000 insurance.

I have heard something about, for example cancer treatments in the USA, that the medical insurance company cannot cut you off in the middle of treatment; but if you are say, a child with leukemia, you had better never see a doctor once you hit your lifetime limit on that insurance. They will pay whatever it took to finish the treatment, then you are cut off and good luck finding any other insurer.

Not sure if this same logic applies to therapy after a car accident, or if the insuance company cuts you off when the bills hit $3M. I guess the other interesting question is how you prioritize the bills. If I cause a spectacular 20-car and tractor-trailer pile-up, do medical bills get first dibs, or does everyone submit their bills and settle for X cents on the dollar? What about projected future care costs?

As for the direct answers, yes, if the insurance limit is reached, bankruptcy is your best option. Then, for the victims, the US Medicare system for the poor, or the victims’ own medical insurance perhaps, would kick in. If that does not cover physiotherapy or rehabilitation, well, sucks to not have universal health care.

OTOH, as mentioned above, $3M is still a LOT of money for 99.999% of accidents.

The other point would be that in lawyer-happy USA, the people needing money would drag anyone and everyone into the lawsuit. Even the tiniest piece of contributory liability would mean that those additional defendants would have to make up the difference under joint and several liability. So include the county or state for the unsafe road signage or poor road maintenance, sue the vehicle manufacturer for poor brake performance, the rental company for failing to ensure you knew how the safety features worked, the GPS maker for telling you you could do 60mph when the road conditions would suggest less… The lawyers would get very rich no matter who pays.

6

Well considering the minimum liability coverage in Florida is only $10,000 that fellow may have been better off with that idiot being from some “hillbilly” state. In fact, very few states have minimum liability coverage limits above $25,000 and many are lower than that. It is a really good idea to carry under/un-insured motorist coverage.

7

Wow! Really? Interesting. I thought this example, from 30-plus years ago, was extreme. Considering the average write-off can easily exceed $10,000 how does Florida do this? Is underinsured driver self-insurance a major area for coverage?

I thought I had read there was an inter-state agreement that the minimum liability had to be $100,000 or some such more reasonable number now. Obviously, I’m wrong.

Hmmm, can a more progressive state decide to ban vehicles not meeting insurance guidelines, or does your right to drive anywhere in the USA override (sorry) this?

8

Under-insured/uninsured motorist coverage is a small part of the policy cost and AFAIK pretty much everyone gets it. So if I’m driving a $200K super car and get hit by someone with a $50K property damage limit, the under-insured part of my policy picks up the rest.

Should I not have under-insured coverage then I would have to sue the other driver in civil court. Sure I’d get a judgment, but I doubt I’d ever see any money. They just wouldn’t pay, taking the hit to their credit score. If I spent more time & money I could try to garnish their wages. With luck I’d see $50 a month or something.

So in reality suing individuals in civil court is not very common as it rarely gets much.

Of course if the driver who hit me was Bill Gates it’s a different matter.

Edit: The above was for damage to my property. If I was bodily injured (like the Florida beach example), the driver’s ins would pay up to the limit and then my own health insurance picks up the rest.

9

What type of traffic accident causes over $3 million worth of damages? I’m sure that someone can pick an example, but that would be like buying insurance for your home that covers an invading army.

I don’t think that State Farm offers such a high limit; that would require an umbrella coverage. It’s overkill to the nth degree.

I have $100k/$300k and the state minimums here are $20k/40k.

10

What would personal care for the rest of their lives cost for several people?

Jerry Pournelle used to write a column for Byte magazine (way back when…!) and described an accident many years ago where someone hit a power pole and knocked high-voltage feed lines down onto the local power lines, thus feeding around 6000 volts into about every house in a multiblock radius. Considering that even light bulbs exploded, let alone every electrical piece of equipment, every appliance, every piece of home elctronics for blocks around burned out - I would hate to be the guy paying that bill… (But amazingly, a few of his computer devices connected to surge protectors came through it just fine.)

11

The biggest claims are usually for medical costs. Since you have the National Health System in the UK that covers this, the insurance industry can afford to cover “any and all claims” other than that.

12

All interesting stuff. I’m shocked and amazed at how low some insurance levels are.

It almost makes a mockery of compulsory insurance. But then again with a $15000 payout cap, rates must be REAL cheap, meaning more people can drive.

13

I’m sure that’s sufficiently rare enough that most people don’t have to worry about it. I just checked with State Farm. The absolute maximum coverage I can buy is $500k/$500k/$500k which means $500k per person bodily injury, $500k TOTAL PER ACCIDENT bodily injury (so if I injure 14 people, they split the $500k), and $500k property damage.

This type of coverage would double my premium (current limits 100/300/100, and state minimums 20/40/20).

Any more than that requires a general umbrella policy (which supplements car, homeowners, etc. across the board). Unless you have substantial assets to protect, I can’t imagine why you would need such coverage. You can’t get blood out of a turnip and nobody will hire a lawyer to try to get millions out of someone with $11.52 in a checking account.

I have never heard of the absurd limits discussed in the OP on a general car policy.

14

You would have to know for sure that the driver who hit you has money. If he has you might win, but also you might loose even more if the person was Bill Gates :stuck_out_tongue:

15

Just to clarify, there are two kinds of uninsured/underinsured motorist coverage. Bodily Injury and Property Damage. The coverage most states require you to carry (or decline) is UMBI &/or UIMBI. UMPD coverage isn’t even offered by every company in every state. UIMPD is even less likely to be offered.

16

No, what makes a mockery of compulsory insurance is the number of uninsured drivers. I lived in Philadelphia for a few years, and everyone I knew who was in an auto accident had to deal with the fact that the other driver had zero insurance.

17

I don’t work in personal lines, but have found that a personal umbrella policy for a million or two coverage is surprisingly cheap. Check with your homeowner’s or auto policy carrier.

18

Coverage for damage to your vehicle, in most states, is under “Collision” coverage, if you can’t get payment from the other driver’s insurance. Just like if you were hit by an uninsured driver and had medical expenses, your own health insurance would cover it (and have the right to sue the other driver to recoup their costs).

19

It should be noted too that if you crash into someone and get a million dollar judgement against you it doesn’t necessary mean you’ll have to file bankrupty or live in a cardboard box. Theres are rules that are different in each state as to what assets can actually be seized, and what wages can be garnished; in my state a comfortable house, a comfortable car, and a comfortable wage cannot be seized. If you have substantial assets an umbrella policy makes sense, and if you have substantial assets you can afford the premiums to protect them.

20

There is a fairly easy solution to that problem: Insurance at the pump – where a few cents per gallon is added to the price of gasoline, to provide a minimal base level of coverage for every driver on the road. Each driver could then decide on their own if they wanted to purchase additional coverage, or collision coverage for their vehicle, etc. But everybody on the road would have a base level of coverage, paid for when they bought gas.

Of course, a whole lot of people would be against this – everyone who makes money off the current system: insurance companies, insurance agents, automotive lawyers, even some highway patrol & court people. But it would have advantages for the rest of us.