Auto Insurance Policy Check


If I could give only one piece of advice regarding purchasing auto insurance, it would be to check your policy to see the limits of coverage you have for underinsured and uninsured motorist coverage. Underinsured and uninsured motorist coverages are crucial parts of your auto insurance policy, but are often misunderstood and overlooked.

Underinsured motorist coverage comes into play when you are in a serious accident caused by the fault of another. If you suffer serious personal injuries, you may have a liability claim against the other party at fault. However, if the party at fault carries only the minimum liability insurance of $20,000.00, and has few assets of their own, you may be left with a large claim but no way to recover the money necessary to pay your claim. For example, let’s assume you sustain a serious personal injury for which the appropriate compensation that should be paid by the party at fault is $500,000.00. If the at-fault party has no assets to collect and only $20,000.00 of liability insurance, then you are likely to recover only the $20,000.00 of insurance. The at-fault party could file bankruptcy or simply evade payment and you would likely never be compensated for the other $480,000.00 you are owed. You simply would be at the mercy of the insurance limits of the other driver, as far as getting compensated is concerned.

However, there is a solution to this problem if you have taken the appropriate steps before an accident occurs. The solution is underinsured motorist coverage, which you can purchase as part of your own insurance policy. Underinsured motorist coverage will compensate you for the amount of your compensable personal injury damages that are not paid for by the other driver’s insurance or recoverable assets. In the previous example, $20,000.00 would be paid by the at-fault party’s insurer, with $480,000.00 being uncompensated. However, if you have $500,000.00 in underinsured motorist coverage, then $20,000.00 is paid by the at-fault party’s insurer and the other $480,000.00 is paid by your own insurer so that you receive compensation for all of your damages. With underinsured motorist coverage, you are no longer at the mercy of the at-fault driver’s insurance limits. You can insure yourself against the risk of being injured by someone who has inadequate insurance to fully compensate you for your damages.

The other piece of good news is that this coverage is very inexpensive to add to your existing policy. Check with your agent to make sure this very important coverage is included in your policy for limits that are high enough to make a difference if you are seriously injured. It does little good to have $20,000.00 of underinsured motorist coverage since the other driver already is required to carry that much insurance. If you are seriously injured in an accident due to the fault of another, having purchased adequate underinsured motorist coverage will have been one of the best decisions you ever made.

One point of confusion is that there is also coverage called “uninsured motorist benefits”. Uninsured motorist coverage covers you in the event you are injured by the fault of another who has no insurance. In contrast, underinsured coverage covers you when you are injured by an at fault party who has insurance, but the insurance is inadequate to pay all of your damages. Uninsured motorist coverage does not apply if the other party carries even the minimum insurance required by law. Therefore, it is important that you have both underinsured and uninsured motorist coverage on your own auto insurance policy. You need both coverages to protect yourself against uninsured and inadequately insured drivers. Both coverages are inexpensive. Make sure you have enough of each coverage to provide substantial compensation for your damages in the event of a serious injury.

© 2014 Schroeder DeGraw, PLLC