Please get “R” done

October 26, 2015 § 67 Comments

This is a topic that I’ve written about before and that I can’t write about enough. It’s dry, it’s a bit legalistic, and it includes the dreaded word “insurance,” but please take a minute to read because it concerns the most important purchase you’ll ever make as a cyclist.

insurance_policy

You may think that if you get hurt in a bike-car collision you’ll be able to recover money from the negligent driver as long as the driver is insured.

What you may not know is that in California the minimal insurance coverage for collision liability is $15,000. What you also may not know is that 85% of the drivers on the road have this minimal coverage.

This means the odds are overwhelming that the driver who hits you will have to compensate you for a maximum of $15,000 and THAT’S IT. Once your expenses exceed the $15k that most drivers carry, you’re done, even when you’ve suffered injuries totaling hundreds of thousands of dollars.

There is, however, a very cheap and very effective way for cyclists to protect themselves and their families from cagers who carry minimal insurance. It’s called uninsured motorist and underinsured motorist coverage (UM/UIM), and it comes standard with every auto insurance policy unless you specifically decline the coverage. [Note: NEVER, EVER, EVER, EVER DECLINE THIS COVERAGE. You may think you’re saving a few bucks but in reality you’re declining the best and cheapest insurance you will ever buy as a cyclist.]

Few cyclists know that UM/UIM coverage on their own auto liability policy exists, and even fewer know that it covers them in a bike-car collision when they’re cycling and get hit by a motorist. This means that if, for example, the driver’s policy tops out at $15k, you have the legal right to turn to your own UM/UIM insurance for the remaining expenses or damages above and beyond the $15k paid out by the driver.

So far, so good, but there’s a catch: If you’re like most people, your UM/UIM coverage is also minimal, often only $15k or $25k. Since you have to deduct the amount already paid out by the offending driver from your own UM/UIM claim, if you have minimal UM/UIM coverage the additional recovery is very small or zero. (15k UIM coverage – Offending Driver’s $15k liability coverage = 0 additional recovery.) It’s not uncommon at all to see a cyclist who has a responsible liability policy for $500k, but a measly $15k or $30k for the UM/UIM portion of his policy.

In other words, the cyclist is being very responsible with regard to paying for damage he might do to others, but completely failing to make adequate provision for the damage that some uninsured drunk or underinsured deadbeat may do to him.

There’s a great solution, though. You can increase your UM/UIM coverage so that it equals the amount of your liability coverage for only a small increase in your monthly premium. Although your UM/UIM coverage is barred from exceeding your liability coverage, as an example, if you have $500k of liability insurance but only $25k in UM/UIM, you can bump up your UM/UIM from $25k to $500k for only a few bucks a month. If you only have $25k or $50k of liability insurance to begin with, you have a problem.

If you ride a bike and have liability coverage of anything less than $100k you are grossly underinsured. I’d say that a barely adequate UM/UIM policy should be no less than $500k. If you have a family nothing less than $1M is enough. If you can’t afford $1M in liability/UM/UIM coverage, sell your extra bike or extra set of carbon wheels. It is the best money you will ever spend as long as you ride a bike, and obviously it’s exactly the kind of protection you want if you’re driving. UM/UIM coverage also kicks in if you get hit by a car while you’re walking.

There are certain insurers such as Mercury who will not offer a policy for more than $250k. Run from these insurers and go with an insurance company that will sell you an adequate policy. Chubb, Allstate, AAA, State Farm, Farmers, and Tokio Fire Insurance and Marine are just a few of the insurers who offer adequate policy coverage. I’ve found Tokio Fire Insurance and Marine to have the cheapest rates with the best coverage and the best claims responses.

For the sake of yourself and your family, take a minute to look at the declarations page of your insurance policy, check liability limits and the UM/UIM coverage, and then call your agent or go online and raise it to the max. This is something you can’t afford to put off.

The other huge benefit to turning to your UM/UIM coverage in the event you get hit is that if you’re forced to use it because the driver’s coverage was inadequate, you actually wind up with a larger recovery than you would if you were making a claim against a driver with adequate coverage.

This is because your health insurance provider will have a lien against any recovery you get from the driver’s insurance. In other words, if Anthem pays your doctor $15,000 in medical bills, Anthem will be able to recover what it paid your doctor from the insurance proceeds you get from the offending driver, effectively reducing the amount you ultimately receive by the amount of their lien. However, when the recovery comes from your own UM/UIM motorist policy, the health insurance provider will have no claim on those proceeds except in a very few limited instances.

Call your insurance agent and raise your limits now. I’ve seen too many injured cyclists with six and seven-figure injuries who are hit by uninsured or underinsured motorists and whose own UM/UIM coverage is only for a few thousand bucks. Don’t be that cyclist!

END

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§ 67 Responses to Please get “R” done

  • I give a hearty “hear, hear!” to this. UM/UIM coverage also kicks in when you are the victim of a hit-and-run accident. This saved my bacon (and got me a sweet new ride!) a couple years ago.

  • Brian in VA says:

    Wonderful advice, Seth! Thanks for reminding all of us.

  • debster822 says:

    We have UM/UIM coverage & will verify the amount when we get home (currently on the East coast for some well-deserved R&R). Thanks for the heads-up; as informed as I like to think I am about insurance, obviously many of us cyclists need this pertinent reminder. Thanks, Seth!

  • debster822 says:

    Reblogged this on Debster822's Blog and commented:
    A worthwhile read. And follow up on this, people.

  • LR says:

    I bumped up my coverage last year after reading your blog post. Thanks again.

  • channel_zero says:

    BTW, you will blow through $15,000 in medical expenses very easily. That’s a few-hours trip to the ER with some bells and whistles. $250K in medical expenses can be blown through in less than a day on injuries that are not life threatening at all.

    $1M UM/UIM policy is the best practice, more if your circumstances support it.

  • Tamar T. says:

    Dang. That’s the best return on a $2.99/mo. investment EVER. Thanks, Seth. I’ll check with my insurer this week.

  • Craig Hummer says:

    Let me know when you want the ‘guest blog’ to give you a real world example! It’s how we met my friend! Thank you for reminding us all.

  • TomH says:

    Is there any simple way for cyclists without a car to get the equivalent of UM/UIM ? That describes my adult son, for example …

    • fsethd says:

      UM/UIM is supplementary coverage that goes with the vehicle. No vehicle, no coverage. However, if you have a car with UM/UIM coverage, you can name your son as an insured on your vehicle, have him pay you the increased premium, and he should be covered. Most importantly, confirm this with your insurance agent/broker. Every policy differs, I’m not your insurance agent and can’t give you specific advice about your policy!

  • Waldo says:

    Just a great and super valuable post, Seth. I feel lucky that my offending driver had a $50k policy and my medical provider agreed to take $15 for its $35k lien.

  • hoggel says:

    Thank you Seth. Your previous post on this topic triggered a chain of action that resulted in increased insurance coverage, a detailed financial plan, and a comprehensive estate plan. Those were all things that I had intended to do but your prompt got “R” kicked off for me. I sleep a little easier now. Thank you again!!

  • darelldd says:

    1. Huge thanks for avoiding “accident” anywhere in the blog. Yay!
    2. What’s the deal for my minor (no driver’s license) daughter who riders her bike every day? Would *she* be covered?
    3. Thanks for this awesome info. I’m on it.

    • fsethd says:

      Your daughter won’t be covered by UM/UIM insurance because she’s not a named driver on the policy. Your next best bet is a solid life/accident insurance policy for her. When she turns 16, make sure she gets a license whether or not she intends to drive, and have her named on your policy.

      I’ve really worked hard to use “collision” instead of accident, very deliberate usage on my part, but it nonetheless sometimes sneaks in. For example, some insurance is actually called “accident” insurance.

      Don’t hesitate to note it when you see it–thanks, Darell.

      • darelldd says:

        I’ll be on you like stink on rice for “accident”, so no worries there.

        Thanks for the info. AAA is still not able to give me a confident answer one way or the other. They’re trying to figure out if we can just add a minor to the policy.

        Currently I’m wallowing in “ACCIDENT” with my AAA policy. I have a “What to do in case of accident” pamphlet from them, and every category has a Per Person and Per Accident column. To reach claims on the phone, I have to choose “accident reporting.” :sigh: In happier news, I recently received a “crash reporting” pamphlet from (of all entities) the CHP. And one of the bullet items on the back says “A crash is not an accident” and goes on to explain how calling collisions accidents implies no causality and no fault. Awesome!

        And finally, for the record: To increase my coverage from 100/300 to 500/500 costs $24 extra per month. As far as the bicycle hit is concerned, Imagine that the “per person” bit is the most important.

        And now I’m on the phone with claims due to my daughter’s bike being stolen from high school on Friday.

      • fsethd says:

        Best $24 you’ll ever spend.

  • dangerstu says:

    Best insurance I didn’t know I had, got knocked off my motorcycle 15 years ago by an uninsured driver, and needed an opportunity on my clavicle. All covered and compensation to match medical costs.

    • fsethd says:

      Here’s another tip: If it’s a hit-and-run you generally have to report it to your insurer within 24 hrs. or they can deny coverage.

  • Chria says:

    I’ve always placed a premium on having good health coverage, and thankfully have never been in this situation, but I’m curious, if I have a health insurance policy that covers everything over a certain small copay, what is my UM policy covering? Said another way, if I don’t expect to incur significant costs beyond property damage, do I need extra insurance for UM? Does it cover pain and suffering compensation as well? Thanks in advance for your wisdom!

    • Bill Stone says:

      Yes, UM and UIM cover loss wages, pain and suffering and whatever damages for personal injury your state permits. Health insurance does not cover loss of ability to work, loss of brains, etc. What you also need is high med pay coverage generally referred to in your declarations as Coverage C. And if you read your health policy it will likely provide that if you recover UM or UIM you MUST REPAY YOUR HEALTH INSURER for any money it paid towards your medical bills. It will be under the section titled SUBROGATION. BUY AS MUCH MED PAY< UIM and UM as your company will permit. It is cheap.

    • fsethd says:

      I get asked this all the time.

      1. Health insurance doesn’t cover pain and suffering which can be six or seven figures.
      2. Health insurance doesn’t cover life planning or future medical care when the injuries are life-altering and will require care long after the injury happens.
      3. Health insurance almost always has deductibles and co-pays which can cost thousands or tens of thousands.
      4. Health insurance never covers your spouse’s loss of consortium claims.
      5. Health insurance never covers lost wages.
      6. Health insurance always has coverage limits which can be exceeded, leaving you to pay the balance. Many people file bankruptcy as a result.
      7. Health insurance, even when the other driver has insurance, gets a lien on your recovery. That’s money that comes out of your pocket–such liens typically cannot be asserted when your recovery comes from UM/UIM.

      UM/UIM protects you when you’re a pedestrian and get hit by a car as well, and most importantly it protects you as a driver when you get hit by a car–as well as the occupants of your vehicle.

      As Nike used to say … just do it.

      • channel_zero says:

        To put this in more concrete terms, imagine an injury that has you unfit to work. The physical therapy for complex injuries typically does not get covered well and is typically the barest minimum.

        Now you have no money coming in, and physical therapy you need, but medical insurance stopped covering. $100K in this scenario won’t last long.

        And then, as Bill Stone points out, the medical insurer can come to you to be reimbursed for “Coverage C.”

  • Bill Stone says:

    Seth, a public service. However, I recommend against even buying insurance from State Farm or Allstate. Too many times to mention when it comes to collecting UIM and UM these companies attack policy holders as if they are all ‘frauds, cheaters, liars, and democrats out to destroy guns-I mean freedom. Seriously, SF’s newest tactic is that any medical bills above what Medicare would pay are simply unreasonable and thus if you have a ten thousand dollar bill to pay SF will only pay like two thousand and you are then responsible for fighting with the hospital/doctor to get them to accept this amount. I joke not the slightest. I suggest anyone interested read “Delay, Deny, Defend.” I fight these jerk wads everyday.

  • Kris says:

    Thanks for this

  • Still recovering from January… Everyday I am reminded that I should’ve had a larger premium with my uninsured motorist (asshat!!). Thanks Seth for shouting out about this!!

  • Sandy says:

    Bravo Wank. I posted this to our bike club. Within a few minutes two of us purchased additional insurance. We got $500,000 for only $30/year. You did a great service here!

  • LesB says:

    Good timing, just this a.m. I got a message from my insurance agent saying it’s time to look at my coverage. I will be working on this.

    What about coverage of MY liability while on the bike? Say I’m at fault in a collision that causes bodily injury or property damage. Does my auto policy cover me there?

    My insurance sent a mailer a while back advertising umbrella coverage, which interests me since I have an extensive umbrella collection.

    Would umbrella coverage cover or help cover the kinds of expenses you mention in this post?

    • fsethd says:

      Auto insurance won’t cover you as a cyclist if you hit someone and are deemed liable through your negligence. You should check with your homeowner’s insurance, which often has coverage for your negligent acts. I had a client once who was sued under his homeowner’s policy for breaking a plumber’s jaw in a bar fight. Coverage details should always be vetted carefully with you and your agent. I’m not licensed to advise you on the merits or any specific policy or to act as an insurance salesman, agent, or broker. I’ve written this as general information that you should take up with the person you buy insurance from. Let me know what you find out about covering your umbrellas.

  • Jorgensen says:

    Yes, Tokio Marine.
    Seven figures. Umbrella too.

  • Jon Phillips says:

    Thank you – wow, was I under insured!

  • Liz says:

    “Chubb”? Really? Did you make thatr up?

    • fsethd says:

      I really didn’t. They’re a high end insurer. Big policies for people with lots of stuff to protect.

  • Anonymous says:

    I particularly liked the stilts part:

    “In summary, [Cal. Ins. Code] section 11580.2 mandates UM and UIM coverage to the named insured regardless of whether the individual is in a motor vehicle or on a horse, motorcycle, bicycle or stilts when injured by an uninsured or underinsured motorist, so long as one of the statutory exclusions does not apply.” (Daun v. USAA Casualty Insurance Co. (2005) 125 Cal.App.4th 599, holding that coverage applied to on-duty police officer riding police motorcycle.)

  • Naftali says:

    Thanks for writing this. I live in Vancouver, where we basically have one Government run insurer. Here we have no-fault basic benefits, Medical and rehabilitation benefits for all “reasonable” and “necessary” costs up to $150,000 under the basic coverage.

    I was rear-ended by a vehicle on August 2nd, luckily, other than a destroyed bike, mostly some bruises and minor road rash. Through a lawyer, I had my bike replaced to the tune of $5000.00 and then additional amounts of $12,000.00 of which the law firm took $4000.00, within 2.5 months.

  • fsethd says:

    Emailed this comment from a reader: Field report on the insurance review with my agent:

    Allstate has a max on liability / UI coverage of $500K. It will cost me $12 per month to increase liability from 250K, and UI from 100K, both to 500K. Hardly a carbon wheelset’s worth.

    I could get an umbrella policy to extend the coverage beyond 500K, but this was not recommended for me since I’m retired, hence no “lost wages”. Plus I’m not supporting a family.

    My Allstate condo policy covers my bike, under “Personal Property Protection” for replacement value of the bicycle with no minimum. Coverage is for specific types of losses such as: theft, vandalism, fire, wind, falling objects, lightning.

    Adding “sports equipment endorsement” makes it an ALL RISK coverage so there are more “types of losses”. Example: If your bicycle disappears but you can’t prove it was stolen or if you just left it somewhere and forgot it. Cost: – $18 a year – $5,000 with a max per item limit of $2,000.

    So, cool! I’m going for this extra protection for me and the bike. Thanks for addressing the clueless-about-insurance factor.

    • Bill Stone says:

      And when you have a claim ALLSTATE WILL deny it and lowball you. Read the McKinnsey Papers where ALLSTATE made it a policy to lowball all claims so that the Claims Division would be a profit center; That is, if a claim was worth 5K and underwriting was designed to charge to cover 5K Allstate will insist their young adjusters only pay 2K thus making an extra 3K. To make this work Allstate also followed the advice to get rid of professional claims adjusters and hire younger work force they could train in the ‘new claims process’. And of course Allstate relies on Colussus, the computer programs that spits out the value of a claim and which is coded to down marker all ‘soft tissue injuries” etc. By the way, Allstate considers your brain as soft tissue-which when you think about it probably about right if a person still has Allstate or State Farm despite the avalanche of documentation of these companies parsimony and vindictive treatment of policy holders.

  • Jimmy C. says:

    Thank you! I read this last night and got “R” done this morning. $25 / month bumped my coverage to $1M bodily injury liability, $500K Property damage liability, $1M UM/UIM, and $100K medical payments. (All max. possible with USAA) I’m sharing this with the rest of my team.

  • fsethd says:

    Received this email, and am posting with permission, along with my response:

    Hi Seth,

    I finally got a chance to sit down and think about all of this for a few minutes. I have to admit that I am pretty confused and was wondering if you could straighten me out.

    I am trying to figure out what the UM actually provides and how it might help prevent a major financial disaster (on my part).

    Imagine I am merrily riding along (in the bike lane) and some underinsured cager takes me out while updating his Facebook page. Let’s assume that I have some rather serious post-crash medical issues.

    I have medical insurance (through work) to hopefully cover medical bills, STD and LTD to cover wage replacement and life insurance to deal with the harsh reality that these things don’t always end well for cyclists.The UM only appears to provide some gravy, to compensate me for the fact that I am now f*&ked. It won’t make me rich, but it might help pay for some uncovered rehab or whatever. It can also pay out for pain and suffering and wage loss (but STD/LTD take care of most of that)
    I am assuming that my medical insurance company would be very interested in tapping into my UI policy to get reimbursed for their costs. Is there any guarantee that they won’t take it all? It seems that I am potentially just paying to insure my (medical) insurance company.

    I am assuming that there is some scenario where my health insurance just won’t pay my medical bills. Why? Presumably I need to dig into the details of the policy in order to find any exclusions, but it would seem unlikely that bike related injuries are excluded. I’ve heard that auto related injuries are sometimes excluded, but was wondering if this was pre-Obamacare. I have one of those high deductible plans.

    One scenario is that post-crash I am no longer gainfully employed. This would mean my medical insurance would change, but … given the new rules about pre-existing conditions, I am assuming that I could pick up my own policy. Obviously this isn’t free, but it probably also isn’t a financial doomsday scenario. Or is it? What am I missing?

    I am all for insurance, just want to know why I am getting it and what it protects me against. I got a quote today and it still isn’t for the values that I want. One can’t increase UI above personal liability, so I have to increase personal liability and UI. Increasing both isn’t too bad, but it isn’t as cheap as just increasing the UI. Note that I had $250/$500k for liability with an umbrella to deal with personal liability, but as we discussed, this won’t help with UI.

    Thanks!

    REPLY

    Most medical insurance has limits. In catastrophic injuries, recovering from your UM/UIM policy can make up for where your health care leaves off.

    Health insurance never compensates for past pain and suffering or future pain and suffering. In catastrophic cases this can reach 7 figures. In garden variety cases it can be as much as $100k. That’s money in your pocket.

    None of the policies you mentioned coverS loss of consortium claims. Your wife has a 6-7 figure claim if the injuries are permanent or catastrophic.

    Health insurers will try to go after your UM/UIM payout. However, California law limits their bite and makes it possible to negotiate the lien down considerably.

    Health insurance doesn’t cover your co-pays or claim denials, which is money you lose in smaller collisions.

    I don’t know what your liability coverage is, but I can’t imagine anyone in LA who drives and who has any type of significant asset or dependents carrying less than $500k.

    Of course there is such a thing as over-insurance. Discuss these scenarios in detail with your broker or agent. UM/UIM is the cheapest, best coverage for cyclists I’m aware of, although it doesn’t cover you when you’re hit by another cyclist or when you take yourself out.

  • Michelle G says:

    Hi. This blog post was passed along to me by a friend and client. Its a great article/blog but, having been through this very sad/bad issue, I would like to add a few comments that should not be overlooked.

    Everything above is correct. I’ll add a few things that I learned.

    Some States have very lame laws that allow insurance companies, hospitals, therapists, doctors, ect to charge 3-5x more for services than would ever be billed under any other circumstance. In some States, insurance companies have been able to get these types of laws passed and they get as much money as you might have in your own IM/UM policy. So, think… you go to your therapist to try to get better and learn how to strengthen you neck muscle (think whip lash or worse) or rehab a broken leg. Normally you pay $85/out of pocket or a co pay. Not in this situation. You can expect them to charge you $385 + per visit. They know they can get it from the insurance companies. Any one you see from the second your accident happens all the way through all of the surgeries is charging 3-5x more. Best scam going and it’s legal for them. Colorado’s laws changed 2 years after my accident.Know what laws apply in your state.

    Many insurance companies will not even talk to you and will offer well under what the other party has for insurance. In some States they do not have to disclose how much insurance the other party has. Not unless you get an attorney. That’s an extra cost and well worth it.

    Finally, some car insurance companies are figuring this out. They know the majority of drivers are underinsured on both sides and they know you will come legally knocking for your own IM/UM. They have started to cap what you can get (remember you are purchasing it) for IM/UM. So, if they have a 250k or 500k cap then ask for an Umbrella policy to be added. You can get these for about a dollar a day which will add on an additional million. And that million will likely get you close to what you could lose when hit while riding.

    Thanks,
    MG

  • Lawyer up says:

    […] Make sure you have high uninsured/under insured coverage on your car insurance policy, especially if you ride a bicycle. I received the maximum amount from the driver’s insurance policy. That was not enough to cover the long term costs of my injuries, especially in regards to my teeth. Once we settled with the driver’s insurance, my lawyer started the process with my own car insurance policy to pursue recovering the remaining amount my injuries required. I was baffled. Driver’s insurance covers you when you’re riding your bicycle? Yep. The uninsured/under insured coverage comes into play. For more info on this, see Seth Davidson’s post. He’s a cyclist and lawyer. His advice on this topic is particularly solid: https://pvcycling.wordpress.com/2015/10/26/please-get-r-done/&nbsp; […]

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