Why You Should Have Uninsured/Underinsured (UM) Motorist Insurance

Some states require drivers to carry uninsured/underinsured motorist insurance, also known as “UM insurance.” A state-by-state list of auto insurance requirements can be found here. For those states, like my home state of Florida, which do not require this coverage, I strongly recommend you get it anyway. Why? Because when another at-fault driver hits you and doesn’t have enough insurance coverage to pay your damages, your UM insurance covers your damages up to your limits of coverage. Do you really want to count on every other driver having adequate insurance, or any insurance at all? Smart drivers cover themselves and get UM.

Examples of How UM Works

Say you get into into a car accident where you suffer $60,000.00 in damages and the other, at-fault, driver only has $10,000.00 in bodily injury insurance (the insurance which pays for your medical bills, lost wages and pain and suffering). Here is how the scenario would play out if:

A. You Have No UM Insurance

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You collect $10,000.00 from the other driver’s insurance, leaving you with $50,000.00 in unpaid losses. If you do not have health insurance, you can actually wind up still owing your medical providers a lot of money. Sure, you can get a judgment against the other driver for the excess $50,000.00, but most people won’t have any money to pay that judgment, especially people who only have $10,000.00 in bodily injury insurance.

B. You have $25,000.00 in UM insurance

In this scenario, you would recover under the underinsured motorist portion of your UM coverage. In some states, such as California, your underinsured motorist coverage only pays you to the extent that it exceeds the liability insurance limits of the at-fault driver — so the amount you can get will vary from accident to accident. In other states, such as Florida, the amount of underinsured motorist coverage you can recover is not reduced by the amount of liability insurance the at-fault driver has. To make things even more complicated, states such as Wisconsin leave whether your UM coverage is reduced by the at-fault driver’s liability insurance up to the language of each insurance policy, so it will vary from policy to policy within the state. On to the example:

You collect $10,000.00 from the other driver’s insurer, and, depending on your state law and policy language, either $25,000.00 (your policy limit — Florida rules) or $15,000.00 (your limit minus the at-fault driver’s liability limit — California rules) from your UM insurer. You still come up short either $25,000.00 or $35,000.00, which, while not as bad as example A, will leave you wishing you had more UM coverage.

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C. You Have $100,000.00 in UM insurance

You collect $10,000.00 from the other driver’s insurer and $50,000.00 from your UM insurer. Why not $100,000.00 (Florida) or $90,000.00 (California)? Because you only had $60,000.00 in total damages, and you are now fully compensated. Feel good about yourself for having the right amount of coverage.

Get Uninsured Motorist Coverage. It’s Affordable

By way of example, as a single man, I pay $76.00 per 6 months for $250,000.00 in UM coverage. This is cheaper than my collision coverage. So I pay less for insurance which covers damage to my body than I do for insurance which covers damage to my car’s body. For me, that’s a good deal. If you can’t afford that much coverage, get whatever you can afford. Any amount of UM is better than no UM.

Stacked or Non-Stacked UM Coverage

There are traditionally two types of UM coverage, stacked and non-stacked. Which should you get? If you only have one car on your policy, get non-stacked. Why? Because stacked coverage just means that if you have more than one car on your policy, you get to recover the total amount of UM insurance for all cars on the policy. So, if you have 2 cars on your policy with $50,000.00 of stacked UM each, you could recover $100,000.00 ($50,000.00 x 2) in UM for one accident. If you have multiple cars, ask your agent to see if it would be cheaper to get stacked coverage on all your cars or unstacked coverage with higher limits on each individual car. In the example above, you would ask if $50,000.00 in stacked coverage on 2 cars is cheaper than $100,000.00 in non-stacked coverage on each car. The end result is the same — you have a total of $100,000.00 UM on each car.

Obviously, the math changes with the more cars you have on the policy. Just figure out the the total UM coverage you want for a single accident. That is the amount of non-stacked coverage you would want for each car. The amount of stacked coverage would be that amount divided by the number of cars on the policy.

Your UM Coverage Travels With You

One nice feature about UM is that it covers you even if you get into an accident in someone else’s car. So, even if you are a passenger in your friend’s car and you get in an accident, your UM will cover you. Obviously, you should read your policy to determine who is covered (family members who live with you, for example) and under what circumstances (some exclusions may apply).

Be Covered Now or Be Sorry Later

I have had many clients who could have recovered more money if they had only had adequate UM insurance. For some of them, it could have been a lot more money. Hopefully, you are not in that boat right now. If you are, all you can do is buy UM now to cover you in the event of another accident.

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