Uninsured motorist protection will help pay your expenses if a driver without car insurance damages your vehicle or causes bodily injury to yourself. Since about one in seven drivers are currently not covered (and many more don't have enough bodily injury or property damage), it's important to ensure you have the the correct coverage on your auto policy. Adding or changing the benefit is very easy, and the cost of this valuable benefit is not large. UMPD (Uninsured motorist property damage) can cover property damage, including your vehicle. UMBI (uninsured motorist bodily injury) can cover loss of income, medical expenses, and additional costs.
Most drivers are concerned about safety whenever they get behind the wheel. Much of this concern is concentrated on the physical aspect, but financial safety is something all of us should be concerned with also, particularly when it comes to the risk of getting into an accident with another driver who may not have insurance coverage. Or, of course, they may not have enough coverage on their existing policy, since many vehicles have only state-minimum liability and property damage limits. That means a paltry $15,000 or $20,000 of property damage, which is not enough to replace many new vehicles. Many states have bodily injury (per person) maximum amounts of $20,000 or $25,000, which is also quite low. Recently, several states have raised their minimum required limits, which has helped many consumers.
It is not difficult to imagine that those who suffer from a recent job loss or other financial pinch may neglect paying the necessary premium to maintain the required auto liability insurance coverage. As the nation’s economy continues to grow, the risk that uninsured drivers exist still becomes more significant. And although the numbers are decreasing in many states, they are not going down fast enough. Penalties for driving without coverage are increasing, which should continue to help drive premiums down. These penalties can also include jail time for repeat offenders.
In some states, these numbers are rising at an alarming pace. Unless the trend reverses, it will be more important than ever to maintain proper UM benefits to avoid paying medical bills yourself, or trying to cover lost wages without any other type of financial assistance. Additional legislation and improved compliance can help reduce the number of uncovered drivers. Online monitoring of expired policies has also helped in recent years.
What UM And UIM Should Cover
Uninsured/underinsured (UM) motorist coverage is designed to provide protection to a policyholder when they are in an accident caused by someone who has little or no insurance available to pay the claims of those who are injured in that accident. As the owner of the vehicle, you can recover sustained damages for these injuries. Without the benefit, you may not get reimbursed for lost wages, pain and suffering, or other related expenses. Depending on the severity of the accident, the related expenses could easily exceed $1 million, and several million dollars over a lifetime.
This benefit is necessary when the person who causes the accident has no current coverage. Imagine a scenario that involves a crash with your vehicle caused by a person who drives through a stop sign. If you were badly injured in this accident and sued the other driver, they would be personally responsible to pay any judgment in your favor, if they had no insurance. Other family members may also have been in the vehicle at the time of the accident. And although they are likely to have been currently enrolled in a private or group health insurance plan, out-of-pocket expenses could be significant.
In many accidents, collecting on this judgment would be impossible if the other driver had no assets. UM coverage can step in under your own policy to pay such a claim, assuming the judgment was final. At that point, the insurer would then attempt to recover as much of the settlement as possible from the party that was at fault. Although it does not impact your settlement, in most situations, the recovery of those assets are futile, and getting 30 cents on the dollar is considered a success. Occasionally, a monthly-income can be negotiated to provide a stream of money to help pay off the debt.
Uninsured motorist coverage also protects your family members if they are passengers in a car that does not have adequate insurance. Often, unfortunately, fatalities and serious injuries result to the passengers that are simply innocent victims in the accident. Also, chronic illnesses and injuries result, which can lead to hundreds of thousands of dollars in medical expenses. Often, the cost of ongoing medical treatment and chronic conditions will result in a larger settlement than a death. Medical advances and newly-developed prescription drugs substantially extend the life span of chronically-ill patients.
Underinsured motorist coverage is similar to uninsured motorist coverage, except that it applies to scenarios where the at-fault driver has some insurance, just not enough to pay the entire cost of the claim. For example, if the at fault driver had $25,000 in liability coverage and the injuries caused in the accident were $125,000, underinsured motorist coverage could pay the $100,000 difference. Again, this assumes there was a judgment and presumably the appeal process (if there was one) was over.
Nearly every state has a requirement that drivers carry liability insurance in order to operate a motor vehicle. Many states, including Ohio, recently increased their required minimum bodily injury liability and property damage requirements. However, this does not guarantee that people will drive with the required coverage. Often, an auto policy will lapse due to non-payment of premium although some states will automatically be notified and suspend a driver’s car registration.
It's also important to understand that UM/UNM laws in each state are different. For example, if you need cheap car insurance rates in Missouri, you may be helped by their specific laws. But, when you consider other nearby states, the regulations are very different. There are also many states that are "no-fault," and litigation is handled much differently.
Michigan, for example, is a "no-fault" state, and rates are extremely high in the Wolverine State. Drivers with older vehicles often are involved in multiple accidents causing extensive damage to the other party. Yet, their own insurer pays the damage, regardless of fault. Detroit premiums are among the highest in the US.
While it is illegal to operate a car that does not satisfy state mandatory requirements, drivers continually break the laws and drive anyway. And unfortunately, this trend will probably continue in the future no matter what penalties may be imposed. Perhaps the only solution is jail time for second-time offenders, which may not be a popular idea.
Minimum Required Liability Limits
Even if someone is obeying the laws, they may not have adequate insurance. In some states, the minimum required limits are as low as $25,000. A serious fracture could easily incur medical expenses alone that are two, three or even four times as high as that amount. Physical therapy could continue for months, or possibly years.
This also does not take into account other costs such as lost wages, extra expenses associated with having a bad injury, as well as pain and suffering. A good attorney will probably find additional items, and a lengthy investigation may actually uncover additional medical problems. Healthcare treatment (especially long-term) can be extremely expensive.
When the percentage of drivers that carry required coverage substantially increases, the need for UM benefits will certainly reduce. However, the percentage of consumers that drive without coverage is not declining, so the need to cover these situations is not declining. It will take additional strong legislation to make a significant difference. In several states, we are beginning to see legislation that combines harsh fines and suspensions in an effort to keep drivers compliant.
NIED (Negligent Infliction Of Emotional Distress) claims have become more prevalent in recent years. It is a very unique type of claim since physical injury is often not present. However, in some recent court decisions, it has been determined that NIED claims would be paid under UM/UIM benefits, although there are some areas of disagreement regarding the single per occurrence liability limits.
Remember that uninsured/underinsured motorist coverage is designed to protect you in the event of an accident. So naturally, it makes sense to purchase as much coverage as you can reasonably afford. The limits for this coverage are stated as coverage per person, and per accident. For example, if you purchase $100,000/$300,000, there will be $100,000 available for each person injured and a total of $300,000 for all people injured in your car. $50,000/$100,000 is the next least-expensive level while in some states, $12,500/$25,000 is the lowest amount allowed.
However, you can select a different limit of UM liability than you currently have for your standard coverage. In fact, often, the UM benefits are less than those amounts. Although you will save money with lighter limits, it may not be worth the benefits you are giving up, considering the large number of uninsured drivers on the road. Certainly, every five years, your liability limits should be reviewed.
States With the Highest And Lowest Percentage Of Uninsured Drivers
Florida -- 26.2%
Mississippi -- 23.6%
New Mexico -- 20.1%
Tennessee -- 19.5%
Michigan -- 18.8%
Alabama -- 18.5%
Washington -- 17.9%
Arkansas -- 16.7%
Indiana -- 15.9%
D.C. -- 16.1%
Maine -- 4.4%
Massachusetts -- 6.1%
New York -- 6.2%
North Carolina -- 6.8%
Nebraska -- 6.9%
North Dakota -- 7.0%
Vermont -- 7.2%
Kansas -- 7.2%
South Dakota -- 7.9%
Pennsylvania -- 8.0%
Minimum Required Uninsured Motorist Amounts In Each State
Alabama -- $25,000/$50,000
Alaska -- $50,000/$100,000
Arizona -- $15,000/$30,000
Arkansas -- $25,000/$50,000
California -- $15,000/$30,000
Colorado -- $25,000/$50,000
Connecticut -- $20,000/$40,000
Delaware -- $15,000/$30,000
D.C. -- $25,000/$50,000
Florida -- $10,000/$20,000
Georgia -- $25,000/$50,000
Hawaii -- $20,000/$40,000
Idaho -- $25,000/$50,000
Illinois -- $25,000/$50,000
Indiana -- $25,000/$50,000
Kentucky -- $25,000/$50,000
Louisiana -- $15,000/$30,000
Maine -- $50,000/$100,000
Maryland -- $30,000/$60,000
Massachusetts -- $20,000/$40,000
Minnesota -- $25,000/$50,000
Mississippi -- $25,000/$50,000
Rates for Uninsured and Underinsured protection may reducing, according to a recent study released by RAND Corporation. The reason? The new Affordable Care Act (ACA) legislation provides healthcare for more persons (although some persons simply applied for different plans), and therefore reduces the risk that your UM will be used. Young single drivers may see he biggest change.
Getting caught driving without car insurance is becoming more expensive in many states. In Tennessee, for example, in July, the least expensive fine for not providing proof of compliance increased from $100 to $300. With more than 600,000 Volunteer State drivers without coverage, lawmakers hope the new legislation will bring the number down.
Also, any person that knowingly provides a false declarations page or information, could pay as much as $2,500 and serve more than 11 months in jail. Starting five years ago, the new law also allowed police offers to tow a vehicle if proper verification is not provided.