Economic Loss and How It Affects the Amount Paid by Your Auto Insurance Company
A collision is not simply the meeting of two vehicles. Aside from the obvious property damage are the injuries to either driver, as well as to any bystanders. Auto insurance coverage is intended to not only take care of the damage and injuries at the scene of an accident, but can also help to pay for lost wages, hospital bills, and even long-term treatments should they become necessary for anyone involved in the collision. The sum-total of all expenses incurred in a collision is known as “economic loss” from an insurer perspective, and can have an effect on exactly how much is paid out to each individual and for what reason.
When an accident occurs and a claim is made, an auto insurance company does several things. First, they get a statement from their insured and also send out an adjuster to look at their vehicle. Next, they liaise with the other party’s insurance company to determine an ultimate payout. Once all of the numbers available have been crunched, the company will begin the process of estimation. Take, for example, a situation in which the passenger of a vehicle suffers a neck injury. The insurance company will factor in the lost wages of that person due to missed work, the cost of their initial hospital stay and treatment, and will then estimate the cost of their continuing treatment, based on recommendations from their doctor. The total number that is arrived at is what will be paid to that individual.
Or at least, it should be. This is where coverage limits on an auto insurance policy come into play. When the total economic loss has been calculated, an insurance company will then examine how much coverage their insured has purchased. Every state has different minimum liability regulations which mandate how much bodily injury and property damage coverage must be purchased. A state with minimums of $10,000 for both means that no less than that can be sold by insurance companies, but they are welcome to sell far more if their customers want the coverage. In the case of an accident payout, an insurance company will only ever pay up to the maximum coverage purchased by their insured. If the client only has $20,000 of bodily injury coverage, but damages to another party are $50,000 in total economic loss, the insured will be responsible for personally paying out the other $30,000.
It is important for every driver to consider the possible consequences of an accident and to understand how quickly bills and other costs can add up. What seems like substantial coverage can quickly be overrun by the total economic loss calculated if an accident involves more than two people or the damage is severe.