The Changing and Dangerous
World of Insurance

In early July, a tennis buddy of mine in Colorado, who we'll call Jim, was leaving the parking lot of his employer, a large defense contractor, when a fellow employee, who we'll call Bumper, backed out of his parking slot without looking and plowed right into Jim's car.

Bumper immediately realized he was at fault and apologized. He then said he was late to a meeting and asked to exchange insurance information later.

Since they were both employed at the same company, Jim had them exchange badge numbers, and they agreed to get together the next day in order to take care of insurance matters.

Bumper thanked Jim and again apologized for having caused the accident. Jim also spotted a witness and took down his information.

The next day when the men got together, Bumper's attitude hardened. Bumper accused Jim of being at fault for the accident. Jim could hardly believe his ears. Why had this nice, apologetic, remorseful fellow employee suddenly turned into such a jerk?

It's easy: Bumper undoubtedly called his insurance company and found out that Colorado had converted from a no-fault state to a tort state on July 1, 2003.

In a tort state, also known as a fault state, if you are at fault in an accident, you will pay for your own damages and injuries. The insurance companies are there only to protect the innocent parties.

How does this apply in the Jim vs. Bumper case? If Bumper is at fault, he'll pay for the damage to his car. If he's injured, he'll pay for the cost of his medical care. If he's seriously injured, he'll spend some time in the hospital.

Have you checked hospital and doctor costs recently? A week-long stay could easily run over $100,000.00. Who pays it? If you are at fault in a tort state and are injured, you do.

Of the 1.2 million bankruptcies filed in the United States in 2001, half were health-related. The trend continued in 2002, with 1,539,111 non-business bankruptcies filed, and just about 50% of them were also health-related.

Don't be surprised to see figures above 50% in tort states, many cases of which are filed by people who didn't know the law or the extent of their coverage until it was too late.

Of course, many of the health-related bankruptcies were and are filed by those without health insurance. But plenty of those are filed by those who thought their health insurance was adequate. An accident will quickly acquaint you with the extent of your coverage.

People in tort states generally enjoy lower auto insurance premiums. That's all well and good, unless you're in an accident. If you are in a no-fault state, the insurance companies will generally pay the costs involved beyond your deductible. You pay for such coverage in the form of higher premiums.

What should you do? First of all, you should find out if you are in a tort state or a no-fault state. Call your insurance carrier to review the law and the extent of your coverage.

If you have a substantial amount of assets, you'll want at least $1 million worth of coverage in case you are sued. And you'll want to talk to your lawyer, since I don't give legal advice.

If you are in a tort state, you'll want to check with your insurance company and get a rider on your insurance policy to make sure that at least your medical expenses are covered even if you are at fault. The insurance rider will cost money, but at least you'll have some protection.

Regardless of which kind of state you're in, check with your health insurance company to see if you are somehow covered by that policy.

Even if you're the most careful driver in the world, you could be involved in an accident. A friend of mine lost control of her 4-wheel drive WHILE DRIVING WITHIN THE SPEED LIMIT on an icy road. The vehicle was totaled.

Continue to the Next Page