Quite often, when a personal auto insurance agent advises you to “know your limits,” the conversation relates to speed limits or drinking and driving. These are important topics. But you may also want to consider your Bodily Injury (BI) liability limit and, equally important, your Uninsured Motorist Bodily Injury (UMBI) liability limit.
Why? Because Maryland insurance regulations changed at the beginning of 2011 and there is a good chance the change affected you.
BI Limit Changes
During the 2010 Maryland legislative session, House Bill 825, passed by both the House and the Senate, effectively increased the BI limits from the $20,000 per person and $40,000 per accident minimum levels that have applied since 1972.
Effective Jan. 1, the minimum BI limit required to comply with Maryland’s mandatory insurance regulations increased to $30,000 per person and $60,000 per accident.
The intent of the new limits is to more adequately protect the injured party. BI liability coverage applies to the injury or death you cause, for example, to people in another vehicle, to pedestrians or to those gathered at a bus stop, when you are at fault and legally liable. The BI section of the liability insurance policy usually covers doctor and hospital bills for the injured parties as well as other related expenses such as rehabilitation, medicines and lost income. Legal fees, bail bonds and court costs also are covered.
After Jan. 1, when you renewed your existing personal auto insurance policy or purchased a new policy, you paid a higher premium for this minimum required limit of coverage. Every insurance company determines the rates it will charge based upon the prior claims experience of its policyholders and projections of the costs related to the frequency and severity of future claims. The rates will vary from company to company.
“I don’t have the minimum BI limits, so this change won’t affect me,” you say. Don’t be so sure.
UMBI Coverage
Frequently, the purchasers of minimum limits policies do so because they can only afford to comply with the mandatory insurance law at the minimum limit level because of their personal financial circumstances.
Some fear that the higher premium necessitated by the new minimum limits may cause more people, such as the unemployed, underemployed or those on a fixed income, to drive a registered vehicle without any insurance until the overall economy or their personal financial situation improves.
This is where Uninsured Motorist Bodily Injury coverage comes into play. If you are injured by an uninsured or hit-and-run vehicle, either while occupying your insured vehicle or as a pedestrian, you may be protected by your UMBI coverage. By requiring all drivers to carry this type of insurance, responsible drivers who comply with the law still can be compensated for their injuries if caused by a person who is in violation of the law. The new minimum limits you may select are $30,000 per person and $60,000 per accident.
Uninsured or Underinsured
What about the irresponsible driver who caused the accident without having proper insurance coverage in the first place?
Maryland’s mandatory insurance regulation has a provision to penalize those who drive without insurance. As a deterrent, the Motor Vehicle Association (MVA) levies an initial fine of $150 for driving a registered vehicle without insurance for even one day. And, after the first 30 days, an additional $7 is assessed for each additional day without insurance coverage.
As long as you have license plates in Maryland, you must have insurance. If you intend to stop driving your vehicle, you should not stop paying for or cancel your insurance until you return your license plates to the MVA.
Another concern is that a person with a poor driving history may find the cost of purchasing higher than the minimum limits to be unaffordable until s/he demonstrates improvement in his or her driving record. But that could mean that these drivers with the worst driving experience, the ones actually causing the accidents, may have the lowest limits available to compensate you for your injuries in the unfortunate case where they injure you in an accident.
Once again, a provision of your UMBI coverage may apply. If the person determined to be liable for your injuries has a BI limit that is lower than your UMBI limit, you may be entitled to collect the difference between the limits from your insurance company. Essentially, this provision allows you to be covered for your injuries for the same amount that your insurance would pay for injuries you caused to others.
Shop Around
The implementation of new Maryland BI and UMBI limits makes 2011 an ideal time to shop for personal auto insurance. A good insurance value is determined by what you get for what you pay. Price alone should not be the sole basis for purchasing insurance or anything else.
Let’s put it this way. If you went into a restaurant and the waiter offered today’s special for only $10, it would be foolish to order it before you knew if you were going to be served a high priced hot dog or reasonably priced crab cakes.
If an insurance agent offers you a lower price than you are currently paying, make sure you are being offered similar coverage and limits from a reputable company. Shop around at some point during 2011 for your personal auto insurance and find the right combination of price, coverage and service to meet your individual needs.
Matt Hauser, CPCU, is president of Matthew J. Hauser & Associates Inc. in Severn, where he operates the GEICO local office. He can be reached at 410-995-0040 or at mahauser@geico.com. More information can be found at www.geico.com/local/mahauser.
