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Auto Accident Insurance Limits & Life Insurance Coverage

Re: Auto Accident Insurance Limits/Life Insurance Coverage

The intention of this article is to first, inform of a tragic case involving an auto accident and second, as an outcome, to urge clients and readers to review their auto accident insurance and life insurance limits with their professional and/or financial advisers.

Although all of the financial details are not set, the actual numbers listed here will be a close approximation of this family’s situation.

Here is the background. Young married couple, two income family with small children. Both parents’ earnings were likely to increase as they advanced in their careers. They had minimal life insurance because both parents are young and healthy. $100,000 limits on uninsured/under-insured motorist coverage. They live a fairly comfortable lifestyle, but have to be careful with their money. One of the expenses they try to save on is their insurance costs.

Unfortunately, husband is killed in a motor vehicle accident. From what we have been able to determine, the “at fault” driver had either no auto insurance or minimal limits. It is also probable that the defendant driver has no other assets.

As a result, their two income family that was comfortable is now forced to try and survive on one income. The chores that were shared by two are now the sole responsibility of the surviving parent. She can either do the chores herself, or hire the work done. Neither choice is good.

Although it is painful, here is the rest of the economic reality for the survivors. There will be social security for the children, but it will not replace the husband’s earnings, nor will it cover the cost of the daily chores he provided for the family. The social security benefits will not significantly increase like the father’s future earnings would have if he had lived, nor will there be a pension or other retirement savings.

There will be $10,000.00 of life insurance that will be received rather quickly—approximately 30 days. That will pay for all but about $4,000.00 of the funeral expenses.

The maximum auto insurance payout appears to be $125,000.00. If there is no dispute about the responsibility for the accident and proceeds are paid quickly, the rest of the funeral bill can be paid leaving a little over $120,000.00. This will be the fund to replace the income and services that would have been provided by the deceased parent.

If there is any dispute about responsibility for the accident and there is a need to hire a lawyer, there may well be several years delay until recovery. After paying expert fees, court costs and lawyer fees, it would not be surprising to have the family left with only $70,000-$80,000.

There are other harsh realities that must be faced by this family. If the decedent was the major fault of the accident, then only the life insurance will be paid. If the decedent was determined to have any fault in the accident, then his auto insurance payout would be reduced by his allocated percentage of fault. For example, if he is determined to by 30% at fault, then there will be a 30% reduction in the payment. If he is determined to be over 51% at fault, then there will be no auto insurance proceeds. Additionally, if there are medical bills they may need to be repaid from the recovery as well.

Finally, consider that the above scenario concerns a death. As grim as it is, the expenses for the decedent stop with the funeral. Consider the scenario where the person is injured, but cannot return to work. Their ongoing medical expenses and need for care are a constant drain on family finances.

I deeply hope that this never happens to you or your loved ones. However, as responsible adults, we know that it can and does happen. We cannot control whether the other drivers on the road have adequate insurance. (The next time you drive down the interstate, do an honest “guesstimate” of how many of the drivers around you have enough insurance to pay for injuries that they may cause.) However, we can make sure that we have enough life insurance to make sure our family is protected in the event of our death. We also can make sure that we have adequate auto insurance limits—including an umbrella policy—to protect us and our families.

Thank you for taking the time to consider the importance of these issues. Please feel free to call our office should you have any questions or concerns.


Steven E. Howes
Attorney at Law
Howes Law Firm, P.C.

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