The Fallacy Of “Full-Coverage” Auto Insurance Policies In The State Of Florida

I cannot count how many times patients have presented to the office stating that they have been injured in a motor vehicle accident and have a “Full-Coverage” policy. These individuals are under the impression that all of their out of pocket expenses will be covered by the various insurance companies involved in the accident scenario. The scenario goes like this; they were stopped in traffic and were rear ended by another vehicle. So, lets label the vehicle that was rear ended vehicle 1 and the vehicle that caused the accident vehicle 2. The person in vehicle 1 is under the impression that vehicle’s 2’s insurance policy will cover all of the expenses, both property and medical, that are incurred being that they are not at fault in this incident. Man, there is a lot to talk about here.

Let us back up a bit and dive into some of the intricacies of the Florida No-Fault auto insurance laws. The State of Florida is a “no-fault” state which I believe is mislabeled. It should be a “regardless of fault” state. So, no-fault means to the average person that no fault is assumed when an accident occurs and / or the person who caused the accident is responsible for paying all costs involved. Both of these assumptions are inaccurate. Now, I say regardless of fault because fault is assessed when an accident occurs and regardless of who is at fault the costs will be covered if you have a valid policy at the time of the incident, given the proper coverages are in place. Ok, what do I mean by this? Well, in the above scenario vehicle 1’s policy will cover the medical portion of the claims and vehicle 2’s policy will be covering the property portion. This is a contentious point, being the not at fault party’s insurance will be paying bills for an accident caused by an at fault party in a no-fault state. Wow, I am even confusing myself with this mess. Basically, regardless of fault means that regardless of who is at fault you are covered. And I believe this is a good thing. It’s nice to be in control of your situation and not rely on others to have the proper coverages in place to pay for their mistakes. Unfortunately in this day and age people are becoming increasingly less responsible for themselves and forget about them being responsible for others. This is why it is important to understand insurance matters and make certain you have the coverages in place to take care of yourself and your family. I will not even get into more complex scenarios involving hit and run incidents, drivers with no license, drivers with no insurance, DUI’s / matters of criminal behavior, or any on-the-clock potential worker’s compensation cases.

Ok, let’s get back to the main topic here, the fallacy of “Full-Coverage” plans. Full coverage means that the policy meets minimum state requirements for policy limits. Again, I said minimum coverage limits. In the State of Florida that is $10,000 personal injury protection or PIP coverage. And this is covered at a 80/20 ratio. Meaning, the insurance company will reimburse 80% of the allowable fee schedule that are reasonable and necessary claims. The policy holder is responsible for the remaining 20% along with any deductibles and any balances above and beyond the $10,000 in PIP coverage. This does not sound “Full” to me. So back to the present scenario. The person in vehicle 1 went to the ER via ambulance, was seen in the ER, had x-rays and 2 CT scans. Their bill for this alone could be over the $10,000 in PIP coverage limits. For sake of argument let’s say they had a $1,000 deductible with a $10,000 allowable bill. Person 1 would be responsible for the $1,000 deductible and 20% of the remaining balance. This represents a rather large out of pocket responsibility for an accident they did not cause.

So, how do we add coverages to approach the “Full-Coverage” utopian dream? There are 3 additional items that can be added to an auto policy in Florida that can really help and do not add that much to the premium costs.

- Bodily injury (BI): BI coverage can be purchased from a reasonable extra $10,000 in coverage to astronomical-in-limits if the person who is purchasing the policy warrants this increased coverage. There are numerous reasons and rationale for wanting and needing large policy limits. This is a topic for another day. BI coverage comes into play in the above scenario to extend coverage to additional costs beyond basic PIP coverage, and additionally will cover person 2, that is if they have BI coverage, if person 1 decides to involve legal assistance and this becomes a medico-legal matter. Once again, this is a topic for another day. But if person 1 retains an attorney person 2 better have coverage.

- Uninsured or underinsured motorist (UM): This seems to go hand in hand with the BI coverage as most are sold together with similar if not the same coverage limits. UM helps if you are hit by another driver who only has basic PIP coverage. Even though having a PIP only policy is considered “Full-Coverage” UM coverage is offered because they are considered under insured, go figure. At first they sold you on a “Full Coverage” plan now they want to up-sell you on UM coverage because people may be underinsured, I just got a few more gray hairs. UM coverage can also work for both the at fault and the not at fault parties being it can cover both parties if once again this becomes a medico-legal matter. In a nutshell UM can cover medical expenses, lost wages, and injury-related expenses for you, any permissive drivers, and your passengers. It can also provide coverage for injuries sustained in hit-and-run accidents

- Medical Bill Pay (MED-Pay): MED-Pay will cover your out of pocket costs. Some of these can be the deductible, 20% remaining and anything above and beyond the $10,000 PIP coverage. So if person 1 has say $10,000 in MED-Pay in the above scenario it is assumed that they will not have a dime in true out of pocket costs being that PIP would cover the majority of the ambulance and ER bills and then MED-Pay will kick in and cover the deductible, 20% remaining and the outlying balance beyond the $10,000 PIP. Adding MED-Pay to your policy is a very smart move for these reasons. MED-Pay also seems to be the most affordable option as well.

- Stacked vs. non-stacked coverages: Basically, if you have multiple insurance policies or multiple vehicles under the same policy you can stack the UM coverages or stack the UM and the BI coverages to multiply the benefits. So let’s say you have 3 cars each with $25,000 in UM coverage. If you were to stack the UM then each car would be eligible for $75,000 or the total of the UM coverages for all vehicles under the policy or policies. This can be confusing but this is the general gist and stacking coverages is a great and cost effective strategy to amplify coverages across the policy(ies)

- Then we have loan, gap, rental car, and road side assistance to name a few more coverages. I could go on in feature length with these coverages if you would like, but I’ll spare you.

I do not want to comment on what coverage limits are reasonable or necessary, as this is a very personal thing that is different for everyone. My recommendation is to print out your policy’s declaration page and truly understand what your coverages are, or are not. Then depending on what you determine is necessary for your situation get in contact with an independent insurance agent who can work with you in designing an affordable and effective insurance policy for you and your family.

I hope this helps dispel the fallacy of “Full-Coverage” in the State of Florida. If further clarification is needed please do not hesitate to get in contact with me or anyone at the office, we are here to help.

This article is purely for educational purposes and should be treated as such. If you have questions concerning insurance policies, you need to call a Florida Licensed insurance agent or go to The Office of Insurance Regulation at http://www.floir.com/ for the proper advice as they will have the final word as it relates to insurance matters.

Dr. Adam Zeccardi DC, FIAMA