Question: I noticed that I have loss of earnings coverage on my auto insurance card/policy. How does this coverage work? Do I have to be in an auto accident to use it?
Answer: Yes, you have to be injured in an auto-related accident and unable to work in order to file a claim with car insurance company for lost wages.
There are a few ways under an auto insurance policy that loss of earnings (also called work loss, loss of insurance or lost wages) can be paid out. The first way is under bodily injury liability. And, if this is where you noticed the loss of earnings coverage, then there is bad news -- it won't cover you.
Your bodily injury liability coverage pays only for those that you injured in an auto accident. This includes their medical expenses and other items, such as their loss of earnings if they’re unable to work due to their injuries. Liability coverages, both bodily injury and property damage, only covers those that you caused harm to in an auto accident, and not you in any way.
To be able to claim for your own lost wages, you need to have the optional coverage of work loss as part of your auto insurance policy or a wage loss benefit under another coverage, such as personal injury protection (also called PIP or no-fault insurance).
Lost wages benefits, either by itself or as part of PIP coverage, vary greatly by state (and sometimes also by insurers), but typically it helps out you, your passengers and other drivers listed on you policy if you receive accident-related injuries in a car crash and are unable to work.
You may get a set weekly amount or a percentage of your actual gross wages lost due to the accident, up to the maximum limit of coverage. There is also usually a certain time frame in which to make the claim and a set period of time for which the payments will be paid out.
Some examples of how lost wages work in various states:
- Minnesota statute 65B.44 entitles drivers with PIP coverage (required in this no-fault state) up to $20,000 in lost wages after being injured in an auto accident. Compensation is calculated at 85 percent of your gross income, up to a maximum amount of $250 per week.
- In Michigan, your no-fault policy will pay up to 85 percent of the income you would have earned, if not injured and unable to work, up to three years. The amount you’ll receive for lost income is limited, and the maximum limit is revised annually by the state each October. (Currently the maximum is $5,289 per month.)
- Pennsylvania offers income loss as an optional benefit under first-party benefit that pays 80 percent of actual loss of gross income and doesn’t start until five working days have been lost after the auto accident.
In some states, you can buy optional work loss coverage to extend loss of income benefits you already have under your PIP coverage or exclude the coverage.
- In New York, your no-fault auto insurance coverage (required as part of your auto policy) includes 80 percent of lost earnings from missed work, up to a maximum of $2,000 per month up to three years from the date of the accident. You can also add on optional basic economic loss (OBEL) coverage to raise your raise your basic economic loss coverage by an additional $25,000.
- In Florida, a typical PIP policy will pay out 60 percent of your lost wages. You can, though, pay more to get additional coverage that will bump your work loss benefit up to 80 percent and raise your total PIP coverage from $10,000 to $20,000. You also can exclude payment for work loss from your PIP coverage in Florida, and receive a reduction in your car insurance rates.
There are eligibility requirements for claiming work loss benefits with your auto insurer. You will need to show work detailed documentation about wages lost (you must have been earning an income and not unemployed) and medical documentation that you were unable to work.
It doesn’t sound as if you’ve injured in an auto accident yet, so you have time to read through your policy and ask your agent any questions you may have about work loss coverage so that you’ll have a thorough understanding of how it works if there is a time that comes you are injured in a car crash and need to use it.