The True Cost of Minimal Insurance Coverage

This week on the NBC network, two new stories ran about a Florida lawmaker who wants to get rid of PIP insurance. Before I set forth why I disagree with these statements, at this time, I believe I should explain what exactly PIP (Personal Injury Protection) insurance is. 

PIP Defined

Florida requires two types of automobile insurance to drive legally on its roads. The first is Property Damage Insurance and the second is PIP. Property damage covers the damages to another person's vehicle or property when you were at fault in a collision. PIP insurance is also known as personal injury protection benefits.

When people obtain these two types of auto insurance policy coverage, they sometimes believe that they have full coverage. Nothing could be further from the truth.

Because Florida is a no-fault state, PIP is mandatory for all Florida vehicles that are on the road. Note: I say that PIP is mandatory; however, many vehicles on Florida roads have absolutely no insurance whatsoever (because it has lapsed) or they have woefully inadequate insurance coverage.

PIP insurance covers the owner of the vehicle and his or her resident relatives when an automobile accident occurs. In other words, no matter who is at fault, the owner of the vehicle can go to their own insurance company to protect them for out-of-pocket expenses, including medical bills, prescriptions, lost wages, etc.

Picture This (a PIP Scenario)

Say, for example, that you and a friend are going out to lunch and the friend is driving. You don't know it, but your friend’s auto insurance lapsed the day before. Naturally, an accident occurs and you (as the passenger) are injured through no fault of your own.

Where do you look for benefits? You would look toward your own auto insurance policy to provide benefits even though your automobile was not involved in the collision. You don’t have to worry about whether anyone else has paid their auto insurance premiums. This is how the no-fault system works.

When you think about it as a car owner, you purchase insurance to protect yourself and your family. It does not matter whose car your family members are in when an accident occurs, they are covered under your auto policy.

As a husband and father, I am glad to purchase the best auto insurance coverage that I can afford to protect my family -- because I simply cannot rely on everyone else to purchase the proper insurance to protect me and my family when and if an accident occurs.

The news story correctly points out that many accidents are caused by distracted drivers, people texting, talking on their cell phones, and -- I will add one more -- drunk drivers. With the cost of quality medical care on the rise, you simply cannot purchase enough coverage to protect yourself and your family (in my personal opinion).

For and Against

Of course, there are arguments on both sides of this issue. The first is fraud.

I understand that there will always be a portion of the population who may try to commit fraud, but it is very small in the overall scheme of things. The insurance companies are well aware of the bad actors, and there are safety guards built into our current system to protect against this type of fraud.

To state that the current system is “plagued by fraud” is ridiculous. That statement is simply a blanket statement made without any citations or authority. This type of statement is made for one reason, in my opinion, and that is to provoke outrage among the reader. If there is some type of study, the author could have (and should have) cited it.

The second issue at hand is the cost of insurance. Also, there are other individuals who will look only at the cost of auto insurance. Auto insurance is expensive, and I will not argue against that point. But, there is much more to consider than just annual premiums. It is my experience that after an accident, people are very upset to learn that they could have purchased higher insurance limits or different types of coverage to protect themselves - but didn't. So, when an individual is looking at cost, they should want all of their options in order to make an educated decision.

Logically Speaking

I do not understand how this Florida lawmaker can talk about getting rid of PIP insurance without proposing a better plan or system. If there is a better plan or system being considered, please let us know. Put it out there for public debate. We are interested in seeing what is going on behind closed doors. I don't see any reason to hide the new plan. Democracy is still ruled by the people, isn't it?

So, I researched his background, and it appears that he is an overall great guy, and we should be very happy that he is in Tallahassee looking out for the best interest of all Floridians. He doesn't appear to be the type of person to propose repealing our current system of auto insurance without having a new plan which would be better for the citizens of Florida. So, why make this statement? Who is really behind this push to repeal PIP? Is it the insurance companies? Is it this lawmaker? Is he just acting as a mouthpiece for the insurance companies? These are the questions that I want to know the answer to.

What Is the New Plan?

The alternative plan is probably ‘Mandatory Bodily Injury Liability Insurance’ (yes, it’s a mouthful!). This would require all drivers to carry bodily injury liability insurance to cover claims made by individuals who were injured as a result of their negligence. In a perfect world, I would agree with this type of system. But, based upon the average consumer's concerns over the cost of auto insurance, I don't see how this can happen in any meaningful fashion. Allow me to explain.

Let's say the Florida legislature decides to repeal the current PIP system and replace it with a system that requires Florida drivers to carry mandatory bodily injury liability coverage. What will be the minimal amount of liability coverage that an automobile owner can purchase? $10,000, $20,000, or $50,000?

How much is enough to protect the person who is rear-ended sitting at a stoplight? Are we going to leave this decision to the Florida legislature

Insurance agent Tim Shaw correctly states that the only possibility of replacing PIP is with a system that requires drivers to carry mandatory bodily injury liability policies (Bodily Injury System). He said that the average driver would save about $80 less per year per vehicle insured.

I am guessing that this number is based on a minimal amount of insurance, for example, a $10,000 policy. I’m sure you are wondering: What if the negligent driver causes a $50,000 injury? That is the first question that popped into my mind, and many more questions immediately followed.

This is a major problem in the state of Florida. It needs to be heavily debated because it is an issue that affects anyone who wants to drive a car, owns a car, or is thinking about purchasing a car. Consumers need to be educated on the True Cost of Minimal Insurance Coverage.

Unfortunately, there is no other plan in place at this time, at least that I know of, so, in my opinion, it's pretty silly to be talking about repealing PIP at this time.