I have been fighting with insurance companies for nearly 40 years. I understand that insurance companies are created to generate profits, but their objective is to provide protection.
In the liability insurance arena, there are two kinds of insurance companies. Most insurance companies are stock companies, which means that they issue stock like any other corporation and operate like other for-profit companies. Their objective is to make a profit for their stockholders.
Another breed of companies is the mutual insurance company. State Farm and American Family are mutual insurance companies. Theoretically, mutual insurance companies are owned by the policy holders, but these function like other employee-owned insurance companies. There is a board of directors and there are officers, and they run the company. The policy holder is theoretically an owner of the company but has no say in its operation. Mutual insurance companies are managed and assets (insurance reserves, surplus, contingency funds, dividends) are held for the benefit and protection of the policyholders and their beneficiaries. Any profits earned by a mutual insurance company are either retained within the company or rebated to policyholders in the form of dividend distributions or reduced future premiums.
I am also insured with a mutual insurance company after being insured by a stock insurance company for most of my adult life. A friend of the family is my agent, and we like the relationship because we know we always have someone we can go to if a claim arises. The company has paid to re-roof our house and to fix hail damage on our vehicles, so the amount of the money the insurer has paid in claims the past five years exceeds the premiums collected. A motivating factor for switching in the first place was the fact that the stock insurer was charging us 50 percent more than what we are paying to the mutual company for our homeowners’ insurance. Otherwise, the cost of insurance is about the same.
Although I have been dealing with insurance companies in my practice for a long time, I also believe in having ample coverage. My wife and I have worked hard to get to the position we are in life, and I view the role of an insurance company to be a protector of what we have. Our liability limits are as much as the insurance company will insure, and we have an umbrella policy to increase the limits of our liability. The cost of the umbrella policy is very reasonable and provides additional protection.
Another important element of our coverage is uninsured and underinsured motorist coverage. Uninsured motorist insurance protects us if the other driver has no insurance, and underinsured coverage protects us if the other driver does not have enough insurance. Higher limits are not that expensive. I have had multiple clients in my career who have been underinsured.
Uninsured motorist coverage is required by law and is a part of every insurance policy. Underinsured coverage is optional. If the other driver has the minimum limits of coverage ($25,000) that coverage will be inadequate if my wife or I are seriously injured or worse. Thus, higher limits of underinsured motorist coverage protect us if that happens.
If the other driver does not have insurance, uninsured motorist coverage also protects us. Uninsured and underinsured coverage pays the same as if the other driver has high limits of coverage, for past and future medical bills, past and future lost income, pain and suffering and for loss of enjoyment of life.
Until recently, if the other driver was uninsured, you could “stack” the policies so if you had four vehicles insured you could multiply the number of vehicles by the amount of coverage. Thus, if you have four vehicles and $250,000 in uninsured coverage, you have $1 million in total coverage. However, I learned recently that his has changed with my company.
A fellow lawyer recently posted a message on a message board that his insurer had issued an endorsement that provides that you can still stack the coverages, but the additional vehicles are only insured for $25,000 under the uninsured motorist coverage. Thus, in my example above, there is only $325,000 in coverage under the new endorsement. I have the same insurer. I recently received the endorsement when I bought a vehicle but threw it in my insurance file without reading it.
I was initially angry when I read the message but remembered that I still have ample coverage with my umbrella. I am waiting to see if the cost of the premium is reduced because the limits have been effectively reduced. I am not holding my breath. I have never been able to stack underinsured coverage, which is another reason to have an umbrella policy.
I suppose I will always have a “love-hate” relationship with insurance companies. If my insurer serves its function to protect me and my clients, I love it. However, if it does not protect us, I fall out of love. I expect the battle will continue.
Bob Buckley is an attorney in Independence, www.wagblaw.com . Email him at email@example.com