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Why Opting Out is a Bad Idea

Doug Oh-Keith, Associate at D’Amore Law Group

Often people buy an insurance policy by telling the sales agent or broker, “Please just get me the cheapest policy.” In tight economic times, insurance falls in there with cable television and high-end groceries as low-hanging fruit to be cut out of the budget. However, what most people don’t realize is the small difference in insurance premiums for “the cheapest policy” will often yield a giant difference in their recovery if they are in an auto accident.

In many states, including Washington and California, auto insurance consumers can “opt out” of coverage like Personal Injury Protection (PIP) or underinsured motorist coverage (UIM). This will lower the insurance premium, but usually by less than $20 per year.

The problem comes when you are injured in auto accident that is not your fault, and the bills start piling up. For the small savings from opting out of PIP, you can look forward to forgoing the medical treatment you need because you don’t have the money to pay for it, and a cavalcade of bills, second notices, final notices, and calls from collection agents. Needless to say this will trash your credit rating, and can make it very hard to get the medical care you need to recover from your injuries.

As for uninsured motorist coverage, there are a very large number of uninsured motor vehicles out on the road. Although most states – including Oregon, Washington and California – legally require you to carry insurance, it’s estimated that 15% of drivers have none (see low hanging fruit argument above).

If you are unfortunate enough to be in a collision with one of the uninsured, and you have no UIM coverage, 99% of the time, you will recover nothing. Why? The alternative to collecting from the insurance company is to file a lawsuit against the driver that caused the car crash. If that person did not have the money (or sense) to purchase auto insurance, what are the odds they will have enough (or any) assets to satisfy a jury verdict?

With no insurance coverage, it is very unlikely that you can find a plaintiff’s lawyer that can help you with a personal injury case. In the unlikely event that the defendant has assets, and you file a lawsuit and go all the way through trial to verdict, rest assured the defendant will turn around and file bankruptcy to avoid having to pay the judgment. At the very least, this ensures you will need to have another full-blown legal action in an attempt to collect your damages.

I am no fan of big insurance, however, the small difference in premiums for PIP and UIM coverage is worth it.

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