A lady went shopping. She walked to her car. An SUV came roaring out of its parking space and sent her flying 15 feet. Its elderly driver had mistakenly stomped on the accelerator. Her husband found her unconscious in a pool of blood. Ventura County’s emergency services arrived promptly and performed superbly.

 She spent seven days in hospital hell with serious injuries. Luckily, her husband wasn’t hit; the vehicle missed him by 8 feet. Luckily, he’s retired and looked after her at home. Luckily, she’s not paralyzed for life. Luckily, her balance returned. Luckily, she could eventually walk and drive again. Luckily, she could return to her part-time job. Luckily, she’d accumulated many sick days, giving an income for a few months. Very luckily, she had Medicare.

 The bills arrived, coming to $178,197.97. Her health insurance company paid up, after discounting them 84 percent(!) to $28,220.78. Yet, despite her insurance, co-payments and other expenditures came to $6,695.

 If she’d had no health insurance, debt collectors would have harassed her for the full $178,197.97, seized her house and sold it. Your house counts as an asset in bankruptcy. Landlords don’t rent to bankrupts. So even though she was blameless, she could have become homeless.

 In this case, the driver had third party car insurance, but only for $100,000. Her attorney advised her to settle for that, even though she might be awarded around $350,000 in court since the driver probably had no assets. Her second shock is that she didn’t get $100,000. Medicare took $23,257.89 from her settlement (thank you, Ronald Reagan). So she got $76,742.11, which (less $6,695) was $70,047.11 net (before legal fees). Yes, it’s better than a poke in the eye with a sharp stick, but it’s miserable compensation for her suffering and disability. The 84-year-old driver who hit her was woefully underinsured.

 Aha, someone pipes up, she has a claim on her own car policy for underinsured motorist. Yes, but that’s only if her own underinsured motorist coverage exceeds his third-party insurance coverage. Since her policy limit was also $100,000, her claim was zero.

 Her third shock is that the old man is considered well-insured! The statutory minimum insurance is $15,000. It’s pathetic. It covers 10 minutes in the emergency room. Welcome to California’s car insurance lottery. Unlike health insurance, it gets no attention.

 As her fourth shock, her husband finds the cost of increasing her motor insurance coverage to $250,000 would be less than $20 per year. What??!! Why didn’t anyone tell her? She could have taken out a $250,000 policy for minimal extra cost and had an additional underinsured motorist claim of $150,000! But her friendly insurance agent wonders if she’d be “over-insured” and explains that the purpose of insurance is to “protect your assets.”

 Certainly, but consider further. Question: What about covering herself from getting hit by underinsured motorists? Question: What about properly compensating other people she herself might injure, in this land of insane medical bills? Question: Why is this issue of underinsurance not better-known, especially by insurance advisers?

 And here’s the Very Big Question: why is the car insurance minimum a laughable $15,000? It’s been $15,000 for at least 30 years. Clearly, nobody has lobbied for it to be raised. Quite possibly, there’s even a lobby to keep it at $15,000 (I believe “umbrella” insurance policies are highly profitable). How many cases of under-compensation or homelessness this “system” has produced is unknown. But the number of such cases should be precisely zero.

 Yes, the lady involved was my wife. She’s not bankrupt and homeless (nor am I, for that matter). But millions have no medical insurance, despite Obamacare. And millions more have woefully low motor insurance coverage. Understand clearly: YOU are at risk every time you drive or cross the street. Anyone near any moving car is at risk. Do you want to be a similar victim of underinsurance?

 In terms of public policy, California has sleepwalked into a twilight zone between a common-law negligence-based insurance system (where you buy insurance to cover claims against you) and a half-baked no-fault system (where you buy insurance to cover yourself). Nobody seems to care about this Russian roulette. So I sent a draft of this article for comment to AAA’s insurance manager and Dave Jones, California’s insurance commissioner. Both consigned it to Davy Jones’s Locker (the watery grave in old sailors’ tales).

 Don’t hold your breath waiting for anything to fix this insane “system.” People lying in pools of blood only matter to politicians if they’re big donors. Homeless people don’t matter to insurance companies. Be glad you’ve read this story and now realize the risk.

 Get thee hence to thy insurance agent and check out coverage of at least $250,000. It’ll be better than checking out sleeping arrangements under a bridge.


Raymond Freeman was recently awarded a Congressional Certificate of Recognition for his writing.