Insurance law leaves drivers with questions

If you've recently received a letter from your insurance agent about changes to your auto insurance, you're not alone. And if you have questions about the choices you now need to make, you're in good company.

The letters are coming from insurance agents anxious to help clients comply with a new Wisconsin auto insurance law. The law was passed as part of the state budget package last summer and placed the onus for compliance on insurance companies. The insurance companies now are sending the letters to explain certain coverages now required and additional coverages being offered that you may opt out of.

Here's what comes next:

Exactly what changes does the law require?

Wisconsin Act 28 of 2009, referred to as the "Truth in Auto Insurance Law," requires all drivers to carry:

  • Uninsured motorist protection with minimum coverage of $100,000 per person and $300,000 per accident. Previously, minimum coverage of $25,000 per person and $50,000 per accident was required.
  • Underinsured motorist protection with minimum coverage of $100,000 per person and $300,000 per accident. The insurance was optional before with minimum limits of $50,000 per person and $100,000 per accident.
  • Minimum medical payment coverage of $10,000. The previous minimum limit was $1,000. This no-fault insurance pays medical bills and/or funeral costs if a covered driver is injured or killed while in an insured vehicle. Consumers have the option to decline this coverage.

The law also requires insurance companies offer optional umbrella coverage. Umbrella policies are those purchased in addition to basic policies to cover damage extending beyond the limits of your basic coverage. That means that if you have an umbrella policy and you are involved in an accident, the basic policy would pay first. If damages extend beyond the limits of your basic insurance, the umbrella policy then kicks in to cover the overage.

Historically, umbrella policies have been used to cover the purchaser's liability, and there has been some question about whether they apply in accidents involving uninsured or underinsured motorists. Under the new law, coverage for uninsured and underinsured drivers is automatically included in umbrella policies unless you specifically reject it.

The law took effect in November 2009 and requires the new minimums be incorporated to all renewals occurring from that time forward.

Effective Jan. 1, 2010, drivers are also required to increase liability coverage with minimum limits of $50,000 per person, $100,000 per accident and $15,000 for property damage. Previous minimum limits were $25,000, $50,000 and $10,000, respectively. Insurance industry sources estimate four of five insured drivers already carry these new minimum amounts.

What does the new law mean for uninsured drivers?

Effective June 1, 2010, auto insurance will be mandatory for all drivers. Wisconsin currently has a "financial responsibility law" that assesses penalties for uninsured motorists only after they cause an accident. Under the new law, however, a $500 fine may be assessed to anyone driving without insurance, regardless of whether they've been involved in any accidents. With the change, Wisconsin leaves New Hampshire as the only state in nation not requiring auto insurance.

How will this affect my premium?

Costs will vary, depending on your driving history, the ages and types of vehicles covered, the experience of drivers on your policy and your choices regarding coverage. The best way to find out how the changes will affect your premium is to talk to your agent.

I've never had auto insurance before. Will it be difficult to get?

The new law prohibits insurance companies from placing drivers in high-risk categories merely because they have not previously carried insurance. Other high-risk factors, however, such as speeding citations, may still be considered.

I have more questions. Where can I call?

Consumers may call the Wisconsin insurance commissioner's office at 1-800-236-8517, but your best bet is to start with your own agent. Your agent can tell you how the changes apply to your specific policy and premium and help you understand the pros and cons of declining optional coverage.

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