Does Your Auto Insurance Coverage Properly Protect You?
Critical Information about UM /UIM Coverage
When insuring your vehicles, what do all those categories mean? What types of coverage do you truly need? How much is enough? What is UM and UIM coverage?
- Liability / Bodily Injury: This is the coverage that protects you from liability if you are the cause of an accident and someone else sues you for damages. If someone sues you, the amount of coverage you have in this portion of your policy is the amount your insurance will pay, if necessary. Or, to put it another way, the limit your insurance will pay before you become personally liable for the remainder.
Example Say you are sued and end up losing the case. The amount of damages awarded to the suing party was $100,000, however, the limits of your insurance policy was only $50,000. The insurance will pay its limit, and you would personally owe the remainder, in this case, $50,000.
- Amounts of Coverage: California State Law requires all drivers carry liability insurance with a minimum coverage amount of $15,000/$30,000 (The first figure means your insurance will pay a maximum of $15,000 per person, and $30,000 per accident. So, if you cause an accident which injures 4 people, the most your insurance will pay for any one person to that accident is $15,000, and the most it will pay combined to all 4 of those people is $30,000.) In this day and age, I would recommend at a minimum that everyone carry limits of at least $100,000/$300,000.
- UM / UIM Coverage: This is perhaps the most important part of your policy, and often times the most overlooked. UM stands for Uninsured Motorist's Coverage, and UIM stands for Underinsured Motorist's Coverage. These amounts provide coverage for you if you are injured by someone else who has no insurance or very low insurance limits. DON'T ASSUME THAT THE PERSON WHO HITS YOU WILL HAVE ADEQUATE COVERAGE LIMITS TO COMPENSATE YOU! State law only requires limits of $15,000/$30,000, and a large portion of the driving population does not have insurance at all.
- Example #1 Say you have fantastic liability limits of $250,000/$500,000, but did not get comparable UM /UIM coverage, and instead opted for the $15,000/$30,000 UM / UIM coverage. Say someone crashed into to you and caused you serious injuries. Your injuries and lost wages put your damages at $200,000. However, the person who hit you had no insurance. You are left to collect from your own policy's UM /UIM coverage, but unfortunately, it only has limits of $15,000/$30,000. So, despite the seriousness of your damages, you can only collect $15,000 for your case.
- Example #2 In that same scenario, if the driver who hit you had limits of $50,000/$100,000, you could collect from him his $50,000 policy limits. However, because your case is worth $200,000, you are not made whole by his policy. As such, you can look to your own policy's UIM coverage, because the at fault driver was underinsured. However, your policy has to be larger than the at fault's party, because he gets a credit for what he paid. Here, your $15,000/$30,000 do not exceed the at fault party's policy, so your UM / UIM policy does you no good here.
- Example #3 However, under that same scenario, if you had UM /UIM limits that matched your liability limits, in this case $250,000/$500,000, you would be properly protected. The at fault party pays its policy limit of $50,000. However, your case is worth $200,000. So, you then look to your UIM coverage, because the at fault party was underinsured. You are entitled to coverage of $250,000, less the at fault party's payment of $50,000. So, in this scenario, you have a total of $200,000 available to you to compensate you after the at fault party's payment of $50,000, which is more than enough to compensate you FULLY for your injuries and damages.
- Don't Cut Corners on UM / UIM Coverage: As you can see above, most people consider automobile insurance as a defensive tool in the event they cause an accident and are sued. While true, you should also use your automobile insurance as a safety net in case you are injured by a party with little or no insurance. By not having high UM / UIM limits, you are rolling the dice. Don't assume you will be injured in an accident by a person with a $500,000 policy. It is far more likely that you will be in an accident with a person that has no insurance or the State minimum $15,000/$30,000 limits. UM /UIM coverage is not expensive, the only restriction insurance company's have is that UM /UIM coverage cannot exceed your liability coverage.
I have seen far too many cases where clients come to my office with serious injuries from a car accident. They have broken bones, surgeries, need future care, and have missed months of work. Their case would be worth at least $100,000. Regrettably, the at fault party's insurance limits are only $15,000/$30,000, and my client had little or no UM / UIM coverage. The result is that I can only obtain $15,000 for their $100,000 case. This is unfortunate and can so easily be avoided, if only they had secured UM /UIM coverage of at least $100,000/$300,000. Remember, don't assume that the person who crashes into you will have adequate insurance to compensate you for your injuries. Help yourself and don't rely on anyone else to protect you if you are in an accident. And you will be surprised how inexpensive high limit UM/UIM coverage is. It will be the best piece of mind you can buy.