Why should I use my insurance to pay for anything?

It might seem a little odd, but sometimes, it makes sense to use coverages on your auto insurance policy to pay for expenses you incur as a result of a collision even though the collision was not your fault. Why?

1. You may have no other choice

If the driver who causes the collision is unknown or does not have insurance, the only potential source of recovery for you is your own uninsured motorist insurance. See my report: “Am I Covered For This? A Quick Guide to Your Auto Insurance Coverages and How They Work.

2. Time is of the essence

If your car is damaged and you are injured in a collision caused by someone else, that other driver, and his insurance, is ultimately responsible for your damages. But, it can often take a long time for a liability claim to be processed and, during that time, you may need the money. For example, if your car is damaged or totaled, and you want to have it repaired or replaced, the other driver’s insurance may ultimately pay for it, but they will not do so until they have conducted an investigation to confirm that their driver was responsible for causing the collision. This investigation can involve interviewing you, interviewing the other driver, obtaining a police report, and interviewing the officer and any other witnesses, all of which takes time, sometimes weeks. While the investigation is conducted, y our car is not getting fixed or replaced, leaving you without a ride.

To avoid that, it might make sense to have your own car repaired or replaced by making a claim under your own collision coverage. A claim on your policy can be processed and paid much faster because you do not have to prove that the other driver was at fault for that claim to be processed and paid. If the other driver is at fault, though, your insurance can investigate his fault and seek reimbursement from his insurance company for anything it pays to repair or replace your vehicle, including any deductible you may have contributed. But all of that will take place after your car is repaired or replaced and you will be back on the road much faster.

Similarly, if you require medical evaluation and treatment, you may start going out-of-pocket right away to pay for your medical expenses. While the other driver’s insurance may ultimately be responsible for those expenses, they do not pay as those expenses are incurred. They will wait until you have completed your treatment to evaluate your claim. They will then offer you a single lump sum to pay for all of your damages, including your medical expenses. The wait for that offer can be quite long, particularly if your injuries are significant and require extensive treatment and a long recovery period.

But if you have Medical Payments (MedPay) coverage on your policy, you can use this coverage to weather your out-of-pocket medical expenses as they are incurred, which puts money back into your pocket much faster.

3. To maximize your recovery

If the collision was caused by the other driver, your MedPay coverage “overlaps” with the other driver’s liability coverage, meaning that they both cover the same thing, that is, your medical expenses. So you can claim the same medical expenses under both coverages. This means that when the expense is incurred, you can submit it to your insurance and be reimbursed for the “actual expense incurred.” When your medical treatment is done, you can then claim the same expenses as part of your liability claim. Under Virginia law, the liability coverage is obliged to pay the full amount of your medical expenses (up to the limits of the available coverage) regardless of whether some or all of those expenses were paid by a collateral source, like health insurance. This can result in more money in your pocket at the end of the day.

And if your health insurance has paid anything toward your medical evaluation and treatment, your health insurer may have a legal right to be reimbursed what it paid if you receive anything from the other driver’s insurance on your liability claim. But you can use your MedPay coverage to reimburse your health insurer, meaning that you may pocket more at the end of your liability claim.

4. To get a return on your investment

Keep in mind that you have been paying for these coverages for as long as you have had the policy. You have been paying for these coverages to protect yourself against this very situation, so it might make sense to get back a little of what you have been paying.

Will it Affect My Premiums?

Maybe. I used to work as staff counsel for a major auto insurance company and was asked this question frequently, so I ran it up the food chain and the answer was, generally, a single claim as a result of a collision that was not your fault should not adversely affect your premiums. To the extend that your premiums change, if you are insured with on the the major auto insurers, usually those rate changes have to do with macro-economic issues. But is there a guarantee? No. In fact, the Washington Post recently ran an article suggesting that some of the major auto insurers were, in fact, raising premiums in certain areas for non-fault claims. But, if the considerations above are more important, or if you stand to receive more from a claim on your own coverages than you would pay over time even with a rate increase, it still might make sense to make claims on the coverages of your own auto insurance policy to get you out of the mess the other driver caused.