Automobile insurance is generally understood by many as a means to protect assets from injured third parties, also known as liability coverage. What happens, though, when you are injured by an at-fault driver who has low insurance limits or no insurance? Your own policy will carry coverage known as uninsured motorist (UM) and underinsured motorist (UIM). This coverage can help guard against an adverse financial impact caused by an irresponsible driver.
Take this example to illustrate the problem. Assume that you have a personal injury case worth $200,000. The at-fault driver has liability coverage of $25,000. Your policy has UIM limit of $100,000. The liability carrier (at-fault driver’s insurance company) will pay the first $25,000. Then your insurer will pay $75,000, which represents the difference between the liability carrier’s limit of $25,000 and your UIM limit of $100,000. Note that you did not get $100,000 in addition to $25,000. Your recovery is limited to the amount of your UIM coverage under this example.
Another significant takeaway is that you have not been made whole or, in other words, fully compensated for your claim. In the absence of a full recovery, you may suffer consequences that you never considered when buying insurance. Medical bills go unpaid, perhaps resulting in a bankruptcy. Lost income is sustained, making it difficult to pay bills. Also, there may be an inability to pay for necessary services, like meal preparation or yardwork. After all, your injury may preclude you from performing activities of daily life.
With the rise of medical costs and bills, it is not uncommon to see medical bills in excess of $100,000 for serious injuries. It is important, therefore, to carry significant UM/UIM coverage to protect yourself. Consider UM/UIM limits of $100,000 per person at a minimum. If economically possible, $300,000 per person would be preferred. Talk to your insurance agent to make sure you are adequately covered. An investment now can protect against possible financial distress due to an at-fault driver.
