Legal Advice: How to Buy Insurance

We are all taught things in kindergarten that apply throughout life. Use kind words. Share with others. Try your best. As we progress through school these lessons compound. We learn reading, writing and arithmetic skills. More lessons come with age, such as the importance of wearing sunscreen, especially here in Florida.

However, I have never seen a single lesson given about the importance of insurance. The gecko doesn’t tell us. Jake doesn’t pass that information along. And the camel is so excited it is hump day that, well, he doesn’t take the time to explain what everything means either.

The insurance we buy generally comes in three major forms: life insurance, homeowners/renters insurance and automobile insurance. Here are some tips on each:

Life Insurance

It’s all too easy to think “nothing will happen.” But too many families end up financially destroyed when a wage earner unexpectedly dies. Some are even forced into crowdfunding campaigns to pay basic funeral expenses. It is a tragedy on top of a tragedy.

There are many options for life insurance. You can get locked-in low premiums by starting plans while young and healthy. Or, if you wait until later in life, you may pay exorbitant monthly fees while carriers bet on how long you will live. Some policies work as investments. You can purchase plans with  premiums that are fully refundable at the end of the policy term or payout the policy limits if you die before the term ends. There are so many variables, it’s hard to summarize these in a single page.

The thumbnail rule on adequate life insurance is about 7 to 10 times annual income. This certainly varies by age, dependents and one’s needs to provide for family after passing. Young parents with small children certainly have more needs than senior citizens with no dependents.

Homeowners Coverage

Homeowner / renter insurance consists of two parts- coverage of your home and/or its contents and liability coverage. Many people forget about the second part, but it’s the most significant aspect of homeowner / renter insurance protection.

For home and contents coverage, in the event of a loss, you need enough insurance to cover the cost of rebuilding at current construction costs and replacing your personal belongings. It does not include the cost of the land. Flood coverage is often separate and dependent on your assigned flood zone.

Many don’t realize it, but this same policy covers you against claims and lawsuits for bodily injury or property damage which you or a family member may cause. It may also pay for damage caused by pets. If you trip someone in public, a garage shelf falls on a neighbor or your gun accidentally goes off hitting someone in the foot, this is the first source of funds lawyers look to. For the insured, it pays for both the fees and costs of the lawyer defending you in court and any damages a court rules you must pay.

How much is enough? Net worth and the amount of risks you take are factors. Most people live in homes reflective of their income, but that isn’t always enough. For renters, many only think about the contents and don’t think about losses to the homeowner’s property.

For this type of insurance, policy limits in the range of 3 to 5 times household income is fairly common. Many carriers insure for less and less these days by adding exclusions so it’s very important to comparison shop.

Automobile Insurance

Many people use the expression, “full coverage” when describing their auto coverage. The expression itself is misleading. “Full coverage” simply means your policy is the absolute minimum required by Florida law. However, being compliant with Florida law may actually leave you feeling empty of coverage.  Florida only requires $10,000 in property damage insurance for damages you cause to someone else and Personal Injury Protection or “PIP,”  which is  also known as a no-fault benefit. PIP pays up to the first $10,000 of your medical bills, minus a deductible.

PIP coverage is why you see commercials with guys like “Doc Tony” and “Ask Gary.” They are essentially chiropractors who treat and bill PIP policies. It’s why the guy with the cowboy-ish hat tells you not to go to the hospital – because hospital bills burn through the money guys like this want. Making matters worse, these “doctors” have become referral services that pick lawyers based on who sends them cases. It’s important that you pick your own lawyer. You don’t want to leave decisions like these up to those involved in pay for play or based on who is golfing buddies with who.  As a lawyer who has handled these cases on both sides for over two decades, if you are significantly injured, it looks far better if your first stop is the hospital and not a commercialized PIP mill.

It’s shocking that under Florida law a motorist is not required to have any insurance for injuries caused to another person. That’s scary. Why? Because car accidents are one of the most common sources of injuries. If the average person has the average insurance policy, he or she essentially has little to no insurance to cover a victim’s hospital bills, medical recovery, lost wages and more.

Our neighbors to the north in Georgia require a minimum of $25,000 in “bodily injury” or BI coverage. That’s what protects you from liability from injuring another person. Florida doesn’t require it. Last year, the Florida legislature tried to pass a law requiring this type of coverage;  only to have it  vetoed by Governor DeSantis. Why? The answer is simple – Money.

Wrecks are happening at higher speeds with greater frequency. As distracted driving goes up, the rates of injury have skyrocketed. My firm has had a brain injury victim, an amputee and a father who can no longer work discover there was $10,000 or less in insurance available.  Families are destroyed and left with little recourse after a mere accident. In those instances, people learn they should have had one other type of automobile insurance called uninsured/ underinsured motorist coverage.

If you only do one thing after reading this article, let it be to check your policy for uninsured /underinsured coverage (sometimes listed as UM/UIM). It’s the most important type of insurance because it protects you in a state filled with reckless, underinsured drivers. It stands on top of an at-fault party’s injury coverage, which is too often $0 to $10,000. It is optional and not a great source of income for the insurance industry, so you may not have been offered this type of coverage. However, it is vitally important. Even the smallest permanent injury can lead to $50,000 or more in medical bills. Carrying UM/UM at a minimum of $50,000 per vehicle, which can “stack” for each vehicle, is a safe minimum. As a rule of thumb. 3 to 5 times income isn’t a bad guideline.

Be safe out there.

About John M. Phillips