Insurance: The Myth of “Full Coverage”

Logo_miniAh, the wonderful world of insurance.  It has often been said that insurance is the one product you purchase that you hope you’ll never use.  Think about it:  If you suffer a loss (house fire, damage to property, accident causing major medical expenses, etc.), your insurance is designed to pay for your loss. If someone makes a claim or files a lawsuit against you for their loss, your liability insurance pays for your defense and will cover any settlement or judgment against you. And because nobody wants to suffer a loss, or be sued for somebody else’s loss, we all purchase insurance and hope we’ll never need to use it.

Regarding auto insurance, too often I have new clients who tell me, “I have full coverage.” But full coverage does not exist; it is a myth. Few of us have the financial means to insure against every conceivable risk. For example, there are various coverages available under an automobile insurance policy (liability, collision, comprehensive, uninsured and underinsured motorist coverage, medical payments coverage). While your collision and comprehensive coverage will ordinarily cover your full loss minus your deductible, the remaining coverages will provide coverage only up to the amount you have purchased. So if you have $100,000 in uninsured motorist coverage, but the uninsured driver caused you to suffer significant injuries and damages well over $1 million, then you are by no means “fully covered.” Or if you are at fault for seriously injuring a pedestrian, but you have only $15,000 of liability insurance, then while you have the minimum coverage under Arizona law, you are not “fully covered.”

I have never sold insurance, and I never will. And I do believe that people can “overinsure” themselves by purchasing too much insurance for their particular circumstances, thereby wasting money in the process. But in representing bodily injury victims over the past twenty years, I have come to learn the importance of obtaining appropriate amounts of insurance, given our financial means, risk tolerances, individual circumstances, and the extent to which we want to provide coverages for our family members in the event of a loss.

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