Why you need MedPay in car insurance

 

When searching for ways to lower your car insurance premium, you may be tempted to drop medical payments coverage, aka MedPay, from your policy. After all, it may not be required in your state, and sounds redundant to your health insurance.
But you'd be mistaken to write off MedPay as unnecessary. In fact, the very limitations of most health insurance policies, combined with the glacial pace of insurance settlements and the risks you can offload with this often-misunderstood optional coverage, argue strongly in favor of retaining, if not increasing, your MedPay.
In a nutshell, MedPay makes good on medical bills up to your coverage limit for you, your family and others riding in your vehicle in case of an accident, regardless of who's at fault. Your medical payments coverage moves with you (walking, riding with a friend or on public transportation, in-state or out), as well as with your insured vehicles, regardless of who's driving. It carries no deductible or co-pay.
If you're injured in an accident that another insured driver caused, it can take months for their car insurance company to pay your medical bills. Sure, your health insurance may pay, but increasingly many of us carry high deductibles and co-pays that can stretch our finances to the breaking point before the insurance settlement with the other driver closes.
The beauty of MedPay is it kicks in before the hubcaps stop spinning to pay your medical bills, health insurance deductible and co-pays. It covers myriad other out-of-pocket costs that your health policy probably won't touch, including ambulance fees, chiropractic, dental, prosthetics and, in a worst-case scenario, funeral expenses.
In the 12 "no-fault" states (Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah), MedPay can even pick up the co-pay on the personal injury protection, or PIP, portion of your car insurance or kick in seamlessly with 100 percent coverage after you've exhausted your PIP.
The premium for MedPay is so miniscule -- often less than $20 per year for up to $10,000 in coverage -- that the benefits you'd receive on just one claim could pay for decades of peace of mind.
"For example, if your health insurance has a $1,000 deductible, a 20 percent co-pay and you have a $5,000 medical claim from an accident, with your health insurance you would typically pay $1,800 out of pocket," says Christy Moulton Perry, director of product management for Great Northwest Insurance Co. "But with your MedPay, you would pay zero out of pocket. That's a big difference."

advertisement

MedPay can be especially important for drivers without health insurance. But forget about using it as a stand-alone substitute. You must carry auto liability coverage in order to purchase MedPay, and you'd have to be injured in an auto-related accident to use it.
Unlike liability coverage, MedPay policy limits do not refer to the total available coverage, but instead to the amount available to each covered injured individual. That means if you, your spouse and your two children were injured in an auto accident, each of you could collect the limit amount on your $5,000 MedPay coverage for a total of $20,000. However, your insurer won't pay the same bills under both your MedPay and liability coverage.

Read more »

Bare minimums may work with bare assets

There are a few situations when buying state minimum coverage does make sense, Higdon says. People with lower personal net worth, such as college students and those who are recently out of bankruptcy, or have little or no income, may choose to carry state minimum coverage.
"If you have absolutely no assets, are living paycheck to paycheck and need your car to drive to work, buying minimum coverage could allow you to drive your car on the road with insurance," says Ryan. "But it doesn't allow you to get much protection for yourself."
You would still be held liable in an accident that's your fault, he says.
If you do opt for minimum insurance, don't become complacent. Review your car insurance needs each year because your financial situation will likely change, Ryan says.

For example, if you buy a house or new car, you'll probably need to revisit your policies. "The right coverage for you at age 18 is probably not the right amount of coverage for you at age 40," Ryan says.

Read more »

You may pay more for 'extras'

Many enhanced insurance policies often have perks for policyholders, Ryan says. For example, they may provide for free roadside assistance to drivers who have a flat tire or a dead battery.
If you skimp and only buy minimum protection car insurance, you'll probably have to pay for these extra expenses out of pocket, he says.
If you get in an accident, you may need to send your car to a repair shop for several days. Traditional policies might pay for the cost of a rental car while your own auto is being repaired. But if you only bought minimum protection car insurance, you'll probably have to pay for the rental on your own, Ryan says.
Higdon says you may even have to pay extra if you decide to switch to another provider. If you carry minimum coverage, you may not get the same discounts given to new clients who had ample car coverage with their previous carriers, he says.

"Carrying higher limits is a sign that the customer is a responsible individual, and possibly a more cautious driver," Higdon says.

Read more »

Full coverage may not be enough

Some people believe that if they elect to buy comprehensive and collision coverage in addition to buying the state minimums for liability, they'll have full coverage, providing them with enough protection, Massey says. However, that may not be the case.
Collision insurance covers your own car if it collides with another auto or object. Comprehensive insurance covers losses to your vehicle not resulting from a collision. Rather it covers losses from events such as theft, floods or fire, he says.

These car insurance products are important, but drivers should also consider whether their liability coverage is enough to protect their assets, Massey says. If you cause an accident and injure other parties, you'll need the liability insurance to pay out damages, he says.

Read more »

More coverage may not be too costly

If you have a bare-bones policy and decide that you need more car coverage, you probably won't have to pay much more than you're already paying, Higdon says. "I've seen clients double their coverage for less than $10 per month more in some cases," he says.
"The difference for many drivers -- especially if they are mature and experienced -- is very nominal," he says.
However, if you need to lower your rates, Ryan suggests asking your current provider to change your deductible instead of reducing your coverage. "In order to save money on your premium, take the highest deductible you can afford," he says.

To find other ways to save, contact an insurance professional to help you find the right amount of coverage at a rate you can afford. "Agents can look at your overall financial picture and help decide the types of insurance that are best for your situation," Ryan says.

Read more »

You could be financially responsible

If you're involved in a wreck that injures another party, you'll probably be on the hook to pay damages, says John Higdon, an insurance broker with HSHC Insurance Inc. in St. Louis. Your insurance may kick in but with minimum coverage, and you could exhaust its limits.
Moderate-to-severe auto accidents can easily reach costs of $100,000 or more, depending on the number of vehicles involved, number of people injured and the severity of those injuries, Higdon says. This far surpasses policies with limits of around the 25/50/10 coverage, he says.
If your insurance doesn't pay out the total amount you owe, the injured party can pursue damages against you until the debt is paid, says Gary Massey Jr., an attorney in Chattanooga, Tenn.

As the at-fault party, you may have to pay to defend yourself, and you also could be forced to liquidate your assets, including your home, cars and some bank accounts to satisfy the debt, Massey says. In addition, your wages could be garnished.

Read more »

How much car insurance is enough?

Some car insurance commercials seem to be everywhere, touting state minimum coverage for less money. The idea is that rates are cheaper with basic coverage than with enhanced car insurance. If you're looking to cut costs, you may even be tempted to buy a bare minimum plan.
This type of coverage is certainly better than not having any insurance, but it may not be the best deal for drivers, says Robert Ryan, president of Ryan & Ryan Insurance Brokers in Kingston, N.Y.
That's because minimum coverage may not provide enough protection in an accident, he says. Many auto accident losses routinely surpass minimum limits.
Ryan says each state has different minimums, but many are similar to the limits in New York, with these levels of coverage:

• $25,000 per injured person for bodily injury.
• $50,000 per accident for bodily injury.
• $10,000 for property damage.

To find your own state's requirements, ask a local insurance agent or contact your state's department of insurance.

If you're considering basic-coverage car insurance, here are five facts you should know.

Read more »