Making Decisions About Car Insurance?
by Thomas A. Archer

There are few more disappointing conversations that I’ve had to have with clients than letting them know they cannot recover their losses caused by another driver in a motor vehicle collision because the client has selected the “limited tort” option on their policy of insurance. After more than 20 years in practice, I am still surprised to hear that some of these clients had no idea that this limiting provision even appears in their auto policy.

In Pennsylvania, drivers may have a limited tort auto insurance policy or a full tort auto insurance policy. New Jersey drivers have a similar choice between what is referred to as the “verbal threshold” or “no threshold.” In Pennsylvania, limited tort basically means, with certain specific exceptions, that you can only recover “economic loss” following a car accident. Such losses might include medical bills, which are in many cases already covered by your auto or health insurance, and lost wages. You cannot, however, seek repayment for pain and suffering, the most significant harm that befalls most accident victims.

If you have never been in an auto accident, it may be difficult for you to appreciate the pain, physical limitations and loss of life’s basic pleasures that often follow an automobile collision. I have seen many cases in my career involving accident victims who endure years of pain and hardship, but whose injuries would not overcome the serious injury classification that would be required to overcome the application of the limited tort option. Where this option applies, as a result of the accident victim’s selection, the victim is left without a remedy for recovery of losses for which the law otherwise provides.

While insurance companies are required to have their insureds sign a form confirming the limited tort selection at time of purchase, the fact is that most purchasers do not appreciate the impact of that decision. This is because most people do not consider the potential value of a future claim for losses as opposed to the relatively limited short term savings realized by selecting the limited tort option. An insured driver might save some money on an annual premium, but those savings will likely be outstripped many times over in the event of a single car accident where injuries cannot be compensated as a result of application of the limited tort option.

Understandably, budgetary concerns may make short-term savings on car insurance look like a good idea. But there are other ways to cut costs, such as increasing your deductible or combining multiple policies with a single insurer that make better sense than leaving you or a family member without the full protection of your insurance. The bottom line is to be informed as to the coverages you have and periodically review those coverages with an agent or representative to make sure that you and your loved ones are sufficiently protected.

Other articles in the Automotive Insurance Decision Series:

Article II: Underinsured Motorist Coverage
Article III: Stacking Coverage Limits