Motor Vehicle Insurance in Pennsylvania

On June 30, 2015 the Pennsylvania Senate passed a bill, raising the minimum limit of motor vehicle liability insurance from $15,000.00 to $25,000.00.
The bill now moves on to the House of Representatives for a vote. The minimum limit is the amount of coverage a driver must maintain, in order to legally operate their vehicle on the roads of Pennsylvania.

At first glance, many PA residents will be unhappy that their insurance premiums are likely to increase. Once they understand the purpose of the increase, and the benefits to Pennsylvanians in the long term, most will be very pleased with this new law.

Let’s begin with an understanding of WHY insurance exists in the first place. The whole purpose of insurance is to provide financial “compensation” in the event of some tragic event. Medical Insurance in case of illness; Homeowners Insurance in case of fire or other property damage; Life Insurance in case of death. Car Insurance, in case of a car accident.

Meriam Webster defines accident as follows:

: a sudden event (such as a crash) that is not planned or intended and that causes damage or injury

: an event that is not planned or intended : an event that occurs by chance.

No one plans to have an accident, but it is essential to plan FOR and accident, so that if one should occur, the injury or loss may be minimized by the availability of compensation. The purpose of having insurance is frustrated, if the amount of compensation available is not adequate to cover the damages suffered.

Consider several examples:

With Health Insurance, consider a policy that costs only $10.00 per month, but only covers one doctor visit per month, no medication, and no Hospital services. Though very cheap, it does not provide any benefits, when needed the most.

Consider a Life Insurance policy, that only covers death by aging. Any accidents or unexpected illness – even cancer – is not covered. Once again, the policy itself may be inexpensive, but only provides payment in a very limited circumstance.

Any type of insurance must be enough to provide coverage when it is needed. You must buy the proper amount of coverage before you even know what might be needed.

With Car Insurance, the amount of “liability coverage” bought by a driver is the maximum amount that a victim of that driver may receive – not the amount the driver themself will receive, if they are the one injured. If I buy $15,000.00 worth of coverage, any victim I injure may receive up to $15,000.00 (if my insurance company, a judge or a jury deems the injuries severe enough to warrant that maximum). If I buy $50,000.00 worth of coverage, my victims may receive up to $50,000.00. [Note: there is a separate type of coverage an individual may buy, in case the driver at fault did not have sufficient coverage. This is called Uninsured and Underinsured Motorist benefits.]

Now consider the present state of car insurance. The legally required limit of $15,000.00 (per person) $30,000.00 (per accident) was created in 1974. This “limit” was thought – in 1974 – to be sufficient to cover injuries in a typical car accident. This limit has NEVER been adjusted to account for inflation. A gallon of gas was $0.53 and an average new car cost $3,500.00. The average income was $9,861.00. At these prices, an award of $15,000.00 would cover a full year of household, driving and living expenses.

In 2015 – more than 40 years later – that same $15,000.00 award will not replace the damaged car; will not replace the lost income due to disability; will not pay any excess medical bills; and will hardly even address the “pain and suffering” it was initially intended to compensate.

The increase in minimum car insurance liability coverage is NOT intended to benefit the insured driver, so much as it is intended to benefit the people INJURED BY the insured driver. Only by passing a law to force drivers to buy more adequate amounts of coverage will there be any hope that the injured victims may receive fair compensation.

There are also “societal costs” to be considered when determining the “fair” limits of car insurance coverage. Who pays increased medical bills when doctors and hospitals try to compensate for unpaid balances; who pays higher health insurance premiums when bills are put through private insurance, instead of through the liable car insurance; who compensates employers and businesses when the injured person is disabled; who pays higher Short/Long Term disability premiums, when the lost time is covered by other forms of insurance, rather than the driver at fault? There is an obvious “trickle down” financial impact throughout society when those responsible for causing accidents do not maintain sufficient insurance coverage to pay for the consequences of their negligent actions.

In summary, an adjustment to the minimum level of liability insurance for drivers is LONG overdue. The small increase in premiums to the general public is greatly offset by the need to fairly compensate victims of accidents. While some may complain that they are being punished for the accidents of “others”, keep this in mind when a family member, friend or co-worker gets injured in “a sudden event (such as a crash) that is not planned or intended and that causes damage or injury”. Meriam.