What if, while you and your family are driving home from an evening out, a drunk driver swerves into your lane, and hits your car head-on at 50 miles an hour? The drunk driver was driving with a suspended license, and no auto insurance.
You may have great health insurance & disability insurance, but you and your family can still be out tens of thousands of dollars in medical costs & lost wages not covered by insurance, rehabilitation costs, physical therapy costs, and compensation for your pain & suffering.
Not only does the drunk driver not have insurance, the drunk driver is unemployed and has no assets. How are you going to be compensated for your injuries and out-of-pocket expenses?
The most dangerous drivers on the road often don’t have insurance, so to deal with this hazard, many states require your auto insurance company include Uninsured Motorist Coverage, to protect you and your household family members from injury from financially irresponsible people.
Some states require you to have Uninsured Motorist coverage, and some states will allow the customer to decline having the coverage. But due to its importance, customers usually have to sign a form stating they decline Uninsured Motorist coverage, or choose to have lower dollar limits of Uninsured Motorist Bodily Injury coverage, than their Bodily Injury liability coverage.
Most states require drivers to have auto liability insurance, so why is Uninsured Motorist coverage needed at all?
As described in the above situation, some people choose to break the law — possibly because they can’t afford insurance, but need to drive, or they think they won’t need it, and take a chance, or they are criminals, irresponsible people, or have drug or alcohol addictions.
Regardless of the reason, there are thousands of uninsured drivers on the road, and you need to protect yourself and your family from their irresponsibility. You don’t need to be driving to be at risk. What if you or your child was hit by an uninsured drunk driver while crossing in the crosswalk in the middle of the day? You can be subjected to injury by an uninsured motorist be simply being at the wrong place at the wrong time.
Uninsured drivers do not avoid the consequences of their actions by you having Uninsured Motorist coverage. They pay the legal consequences, and the insurance company, after paying an uninsured motorist claim, will pursue the responsible party to get their money back. There are many people paying back insurance companies, or having their paychecks garnished, for accidents they had when driving uninsured.
Another huge concern for drivers are other drivers having auto liability insurance, but having only the minimum amount of coverage required by the state.
For example, in Nevada, the state minimum liability coverage is only $15,000 per person, $30,000 per accident for Bodily Injury liability.
Say a teen driver rear ends your car at 30 miles an hour, because the teen was texting while driving. Your out-of-pocket medical expenses, lost wages, pain & suffering compensation equals $50,000. The teen driver’s insurance pays its limit of $15,000 per person, shorting you the remaining $35,000 owed to you, and leaving you with unpaid bills & possibly a desperate financial situation.
Higher risk drivers — inexperienced drivers, drivers with tickets & accidents — pay a lot for auto insurance, so they often choose to have the minimum amount of coverage to be able to afford their auto insurance.
Other drivers, too, want the cheapest insurance possible, thinking they will never need it, so they buy the minimum coverage.
A lot of people take no interest in their auto insurance coverage, choosing to think having auto insurance alone will protect them no matter what happens, only to find out their auto insurance has a low amount of coverage, and they are responsible for all the costs, once their insurance policy has paid its limit.
Just like the uninsured driver, the under-insured driver is responsible for the damage & injury the driver caused in an auto accident, not covered by the driver’s auto insurance.
But in the above example, how are you going to get $35,000 from a teen? Even if the teen was driving their parent’s car, do you want to go through the hassle & expense of a lawsuit?
Uninsured Motorist coverage compensates you for drivers without insurance. Under-insured Motorist coverage compensates you for drivers without enough insurance.
I will use the example of the teen driver, to show you how it works. You are due $50,000 for your injury caused by the teen driver. The teen driver’s insurance pays its per person limit of $15,000.
You have Under-insured Motorist coverage on your auto insurance policy, in the amounts of $100,000 per person, $300,000 per accident for Under-insured Motorist Bodily Injury coverage. Your policy pays the additional $35,000 you are due from your injury by the under-insured teen driver.
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For example, If, in the above situation, you have a $100,000 per person Under-insured Motorist limit, but the amount due you from the accident was $125,000.
The teen drivers’ car insurance policy would pay $15,000, your policy would pay an additional $85,000 (with your total compensation from the teen driver’s auto insurance, and your auto insurance, at $100,000), and you would be short $25,000 of the proper compensation.
A high-speed accident with a drunk driver can devastate you financially, whether the drunk driver did not have insurance, or had the state minimum liability coverage.
What if your the car accident leaves you a quadrapaleigic, unable to work, and needing nursing care for the rest of your life? Even if you fully recover from your injuries, your costs can be catastrophic to your finances.
As with auto insurance liability coverage, my advice is take as much Uninsured and Under-insured Motorist coverage as you can afford. Most insurance companies will not allow you to take more coverage for Uninsured/Under-insured Motorist coverage than you have for liability.
For example, if you have $100,000 per person, $300,000 Bodily Injury liability, you can take up to $100,000 per person, $300,000 per accident for Uninsured/Under-insured Motorist Bodily Injury coverage.
If you have a million dollar Umbrella Liability policy, and your Umbrella policy does not offer an option to cover you against uninsured/under-insured motorists, your auto insurance company may allow you to increase your Uninsured/Under-insured Motorist coverage on your auto insurance to one million dollars. Contact your agent or insurance company to discuss your options for Uninsured/Under-insured Motorist coverage, if you have an Umbrella Liability policy.
Please follow this one rule:
Take as much Auto Liability and Uninsured/Under-insured Motorist coverage as you can afford, and always have the same limits for Liability and Uninsured/Under-insured Motorist coverage.
For example, if you have $100,000 per person, $300,000 per accident for Bodily Injury Liability, you should take at least $100,000 per person, $300,000 per accident for Uninsured/Under-insured Motorist coverage.
As mentioned at the start of this blog post, your insurance company, as required by the state, will have you sign a form if you wish to have lower Uninsured/Under-insured Motorist coverage, than your liability coverage.
Some states include Under-insured Motorist coverage with Uninsured Motorist coverage.
For example, in Oregon, you are protected from both under-insured & uninsured motorists by Oregon’s Uninsured Motorist coverage. Washington covers you for uninsured & under-insured motorists under Washington’s Under-insured Motorist coverage. Other states may list Uninsured Motorist & Under-Insured Motorist coverage as two separate coverages.
If you live in a state where Uninsured Motorist coverage & Under-Insured Motorist are separate coverage, contact your insurance company or agent to discuss the need for having Under-insured Motorist coverage, if you have it at the state minimum level. You may not be able to collect under this coverage, since any driver with less than the state minimum liability coverage is considered uninsured.
Some states offer Uninsured Motorist Property damage coverage, in addition to Uninsured Motorist Bodily Injury coverage. Uninsured Motorist Property Damage covers damage to your car, similar to Collision coverage, if it is damaged by an uninsured motorist.
Although this is an inexpensive coverage, do not take more Uninsured Motorist Property Damage coverage than the value of your most expensive car.
For example, if you have a brand-new $30,000 car, you don’t need $100,000 Uninsured Motorist Property Damage, because you will never get paid more than the value of your car. But if you may buy a high-end luxury car, you may want to keep $100,000 Uninsured Motorist Property Damage, since you will only save a few dollars every 6 months with less coverage.
Some states don’t offer Uninsured Motorist Property Damage, and rules & coverage vary from state to state, so discuss your needs & the benefits on Uninsured Motorist Property Damage with your agent.
Have you needed Uninsured Motorist coverage? What do you think about its importance? Please leave a comment on my facebook page. Follow me on Twitter for important insurance consumer news and new blog entries at CarInsWatch.