The Auto Insurance Aftermath of Hurting or Killing Someone in a Crash

It's a nightmare scenario that no one wants to consider: you or a member of your family injures or kills someone while driving your car. The injured person could even be someone in your car, such as a friend or family member.

If you believe this cannot happen to you, you are mistaken. According to the Insurance Institute for Highway Safety, nearly 34,000 people died in car accidents in 2009. According to the National Center for Injury Prevention and Control, more than 2.6 million Americans were treated for non-fatal injuries in car accidents that same year.

There are many pressing questions for families dealing with this tragedy, such as What happens next? Who will foot the bill for medical or funeral expenses? Will my insurance premiums rise?

The answers are dependent on a few key facts, which include:

  • Whether or not you had auto insurance at the time of the accident.
  • What types of coverage did you have if you had auto insurance?
  • The rules and regulations of your state, as well as those of your insurance company.
  • The amount of money you spent or lost because of your accident.
  • If you have valuable personal assets in addition to your home.

"Depending on the situation, you might get lucky and not have much happen to you," says Elliot Olsen, a partner at Minneapolis law firm Pritzker Olsen. "Or it can make your life a living hell."

Who’s responsible for Injuries or Fatalities

Even if you are a cautious driver, you and your family could be held liable for a catastrophic accident, according to Thomas Layman, automotive division claims manager at GMAC Insurance. This is due to the fact that most insurance policies cover any immediate family members who live with you.

Consider the following situation: a farm family's 16-year-old son was texting while driving the family car. The teen collided with and seriously injured two motorcycle riders. In this case, the injured couple hired Olsen to sue the farm couple for damages. The farmers had little insurance coverage, and their farm and livelihood are now in jeopardy.

What If You Don’t Have Car Insurance?

It's a common misconception that nearly every American owns a car. According to the Insurance Research Council, the percentage of uninsured motorists has risen from 13.8 percent to more than 16 percent.

If you don't have car insurance and a member of your family causes a car accident, one of two things will happen.

If you have no meaningful personal assets — say, you rent an apartment and drive a junker — the injured person or their family will most likely turn to their own insurance policy to cover medical or funeral expenses, according to GMAC's Layman. He says that if the injured person or their family do not have insurance, they are likely out of luck.

However, if you have assets other than your home, such as a boat, valuable artwork, or a vacation cabin, you may be sued and forced to forfeit those assets to help compensate the injured person, according to Olsen, the attorney. This is why it's critical to have the best auto coverage policy for the drivers in your household.

What If You Don’t Have Enough Insurance?

Many people have auto insurance, but only the bare minimum required by state law. This will come back to bite you if you cause a major crash.

"I had one case where a doctor was woefully underinsured," Olsen explains. "His son was driving and caused serious injury. To settle the case, the doctor contributed $300,000 of his own money."

What Happens to Your Insurance Premiums?

It's an insurance industry quirk, but if you cause a serious accident and it's your first, your auto insurance rates may not rise, according to GMAC's Layman. Some insurers offer first-accident forgiveness and do not raise your rates.

Other insurance companies use a "point" system and will assign a number of points to the crash based on the circumstances and payout costs of the damages you caused. If alcohol was involved in the crash, or if it was not your first, your insurance rates could skyrocket.

What If You Get Sued?

If you have car insurance, your insurer will work with the injured person or his or her family to resolve a claim. The insurance company's attorneys will make a settlement offer up to the policy's coverage limit.

"It's actually quite common for these types of claims to be settled out of court," says Allstate spokeswoman Christina Loznicka.

However, the injured party may reject your insurer's offer and decide to sue you for additional compensation. In this case, the insurance company is usually required to represent you in court — but only up to the amount of coverage specified in your policy.

Because of this limitation, policyholders frequently retain the services of a private lawyer, according to personal injury attorney Oliver Pelly, a partner at Phillips & Pelly in San Diego. The associated legal fees can be significant.

"You should insure yourself up to your worth," Pelly advises.

Making Sure You Have Enough Auto Insurance

Take out an additional policy known in the industry as "umbrella" insurance to ensure you're fully protected financially in the aftermath of a crash involving injury or death, according to attorney Olsen.

An umbrella policy protects you for costs that exceed the limits of your auto insurance policy by providing uninsured and underinsured motorist coverage, as well as general liability coverage. Umbrella insurance is inexpensive; Olsen's umbrella policy costs $400 per year. It's a fantastic deal in his opinion.

"You're buying peace of mind," says Olsen.