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

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:

Settlement tip

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.

Settlement tip

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

  1. D.Ellis says:

    I live in California and just recently settled my case (I was hit by a driver with a limited insurance policy of $25,000 a little over a year ago). It was a clear cut case, no depositions, or any question of fault (the accident happened in front of a Police Station with more than a few witnesses). I have UIM insurance (100k). My Attorney had made a demand of $45,000. We are settling for the full amount of the driver’s insurance policy (25k) and my Attorney wants to put in a claim with my UIM insurance for the rest. My Attorney is charging 40% of the total awarded.

    I have a few questions regarding this whole matter (any help/clarification/reassurance would be greatly appreciated):

    1st) Will my insurance rates go up because I put in a claim for the UIM? My Attorney informs me that they won’t, but somehow I feel he is just very hungry and it is an easy buck for him. Insurance companies always figure out a way to come out on top and I can’t imagine they haven’t figured out a way to in this instance also. And should my Attorney be awarded 40% of my UIM?

    2nd) Earlier on in the case, I made a call to my Attorney to see how the case was going. His assistant answered and said “Is this about declining the settlement offer?”, I replied that I had not been informed that there had been a settlement offered and that therefor how could I decline. Another Attorney got on the line and informed me that the settlement they offered was a joke ($6,000) and that he had not wanted to bother me with such an insult so they filed with the courts to scare them. Because they did this my original 33.3% fee now went up to 40%. And of course I would not settle for $6,000, but how would I know if this really happened and that they didn’t just file to get the 40% since it was a clear cut case and I would think they would need my approval to decline any settlement offer?

    3rd) My Attorney was so happy when they settled, he told me it was the easiest case he’s dealt with, all he did was call them and ask them why wasn’t this case settled yet and that my costs and damages were 42k and that he knew the policy they were dealing with was only 25k so they should just settle for the full policy because I have UIM and that will cover the rest! Am I wrong in assuming that he left out the part that he said he would not go after the guy personally for the rest if they settled for the full policy amount??

    4th) Does my Attorney need to be involved with a UIM claim? Why do I feel like I am being taken for a fool and that he just won the lottery? Shouldn’t he be looking into finding the rest of the 42k from the defendant? If I make a claim for my UIM, I do not feel like he should be involved or get a cent from it as I have paid for the UIM this whole time and to give him 40% of it seems so extremely high when this is the easiest case he has had to deal with. Am I wrong??

    5th) On my final bill with regard to settling with the defendant (25k) they charged me $150 for medical records. That would be fine except for the fact that I already paid for them and hand delivered them to their office (a suggestion by one of the assistants at the office to move things faster). When I talked with the billing person, she said “well we have the bills for them” and then I said “that is not my fault if your office requested records that they already had” then she said “so basically you are debating $35 on your bill?”, at that point I said that I would leave a message for my Attorney to give me a call and I would talk it over with him. I have not heard back so I just signed the papers and sent them in. It may not be a lot to them, but I am out of work now and it just seems so inconsiderate and frivolous of them. So basically I am paying for these records twice. How nice for them that $75 + $150 is a joke to debate. I am stuck here with over 6 months of back rent to pay among other pending bills. People usually only debate money when they are broke, if this was not the case for me and I was financially stable I would surely overlook it.

    6th) This firm is extremely difficult to communicate with, no email, no voice mail, no direct lines, etc. Everything is done through snail mail and phone calls when they can get back to you although if your Attorney cannot get back to you another one will. At first I was like “What kind of backwards place is this?”, but I was so overwhelmed with medical needs and my car being totaled, work (ie. self-employed so no medical ins., or paid medical leave), etc. etc. that I just dealt with it. What is your take on this type of communication policy?

    Maybe I am over reacting, I am unsure, would definitely appreciate any light you could throw my way on this whole situation. I would love to feel at ease or at least enlightened as to the type of situation I am involved in.

    Cheers!

    • fl_litig8r says:

      1) Your insurance rates typically do not go up for an accident in which you were not at fault. However, in some states (I’m not sure about California) insurers can raise rates for “excessive claims activity” regardless of fault — so if a person gets in 5 accidents in a year, her rates may go up even if she wasn’t at fault for any of them. What constitutes “excessive claims activity” is dependent upon the insurer and the state’s insurance laws.

      2) I would imagine that the insurer made its $6,000.00 offer in writing. Ask to see the offer if you want proof that it happened. While your lawyer should have gotten your permission to decline the $6,000.00, unless you already told him the minimum you would accept (and it was over $6,000.00), you haven’t suffered any harm from him rejecting it as you admit you would have declined it anyway. As to the 40% fee, read your fee contract carefully. Does it say that the fee switches to 40% upon the filing of the Complaint, or upon the filing of the Complaint and an Answer by the defendant in which it denies liability? In Florida, the latter is the standard provision, so if a lawyer files a lawsuit and the defendant automatically pays — or if it files an Answer in which it admits liability — the fee is still 33 1/3 %.

      3) I’m not really sure what you’re asking here. That’s kind of an awkwardly worded question. If you’re asking whether he was wrong to tell them that he would get the rest from your UIM insurance, then no, he wasn’t. Because it doesn’t appear that your case is worth more than the BI and UIM combined, there’s no real threat of you going after the insured personally — why would you when you have UIM? Now, your UIM carrier may be able to go after the insured personally for reimbursement through what’s known as a subrogation claim. For this reason, many states require that you get the UIM carrier’s permission before settling with the BI carrier. In Florida, if you don’t, you waive your right to collect UIM. Ask your lawyer if California requires this as well before signing a release on the BI settlement.

      4) Most fee contracts cover all aspects of representation in an automobile accident claim, including any UIM claims. So, unless your fee contract specifically excludes the UIM claim, you hired him to handle that, too. If you terminate him at this point, you’ll still have to pay him. Note that for the UIM claim, your fee should still be 33 1/3% until he actually files suit against the UIM carrier — and possibly until the carrier files an Answer denying liability, as stated above. The fee doesn’t become 40% on the UIM claim just because your lawyer filed suit on the BI claim.

      5) I’m going to side with the firm on the medical records issue. Any lawyer who trusts his client to go out and get medical records is asking for trouble. How does he know that the client didn’t pull damaging records from the file? Lawyers should always get medical records directly from the source. Their reputations are on the line when they send out demands. If they send an incomplete medical file due to client tampering, it hurts all of their cases (and their clients).

      6) Firms are free to choose the method of communication with their clients. Mail and phone is acceptable, as long as they communicate at reasonable intervals to keep the client informed about the status of her case. Some lawyers don’t like communicating with clients via e-mail because clients may abuse this and e-mail them constantly due to the lack of effort involved and the fact that it’s available 24/7. If you have trouble getting your lawyer on the phone, I’ve written a specific article about that.

      I hope this answers your questions.

  2. Matt says:

    If I was selling my car, and if I allowed a potential buyer to drive my car while I was riding along as a passenger, and if that potential buyer drove my car into a wall, then would my uninsured motorist insurance pay for my medical bills beyond the medical payments part of my insurance plan? And my pain, suffering, and lost wages?

    The potential buyer doesn’t have insurance, and I live in California.

    • fl_litig8r says:

      Unfortunately, no. Cal.Ins.Code Section 11580.2(b)(2) excludes from the definition of uninsured motor vehicle “a motor vehicle owned . . . by the named insured”. While this subsection is stupidly placed in a section of the statute which would seemingly limit its terms only to those cases involving an uninsured motor vehicle “whose owner or operator is unknown”, California courts have already said that this would make no sense and have applied the exclusion to cases where the driver and/or owner were known (see this case, for example). Because you were injured in a car you owned, your own uninsured motorist coverage wouldn’t apply.

      As I’m not a California lawyer, you should of course confirm this with one (but I’m pretty sure I’m right on this one).

  3. Fred says:

    Very helpful site, but my interpretation of what you say here appears at odds with what I’ve read elsewhere about UM insurance. I’m researching this as my son was hit by a car about a year ago and is just about to finish with his recovery. I have $100k UMI. The driver’s insurance company is not willing to give their limits, but for the sake of this comment, let’s assume the driver has $100k liability coverage. In other sites I often see statements like the following:

    “Generally, underinsured motorist insurance is only available if the at-fault driver’s liability insurance policy limits are less than your underinsured motorist policy limits.”

    Which I take to mean that my UMI is not going to come into play even if a reasonable claim for my son’s injury is greater than $100k.

    In a
    comment here, you say an injured party with $25k of UMI will still be able to access it, when the liable party had $250k of insurance, as long as the claim is greater than the policy limit.

    Does this vary by state and yours is something of an outlier, or would you consider your advise here to be “General”ly applicable?

    • fl_litig8r says:

      This does vary by state. For example, California underinsured motorist coverage only pays out to the extent it exceeds the tortfeasor’s liability coverage. This is really a ridiculous way to handle underinsured motorist coverage, and creates a situation where your coverage may wind up being illusory. You pay a fixed premium for a certain amount of coverage, but that coverage may or may not exist depending on how much liability coverage the tortfeasor has? Insane. I’m going to have to update my article to point this out.

  4. Fred says:

    My earlier comment is awaiting moderation, but not finding anything more definitive on the web, I dove into our insurance papers. I first found an amendment to the coverage on a page with this: 00-06/12, which I’m assuming means June 2012. It says the UIM is only applicable, if our policy is greater than the limits of the at fault insurance and there is no stacking. But this was an amendment, so I went to the original policy to see what it said. It seemed to say the same thing. Then I found an amendment marked 02-04/10, that appears to have changed the original policy, so that UIM applies if damages are greater than the at fault insurance liability limits and allows stacking up to 3 vehicles. So I guess the answer to my previous questions is that there is no general answer. It seems odd that my insurance company would change to more favorable terms on their own for a couple years and then revert, so I guess there was some law change in Wisconsin around these times, though I did not find mention of it. My son’s accident was in 2011, so hopefully I’ve read these numbers correctly as dates.

    • fl_litig8r says:

      Wisconsin’s UM statute was recently changed (April 12, 2011) to remove the definition of “underinsured motorist”, leaving it to be defined by the insurance policy. While a Wisconsin UM insurer is still permitted to reduce its limits by the amount you are paid by a liability carrier (statute link here), whether it does so is now a matter of what it chooses to put in its policy. Your policy language at the time of the accident will control this.

  5. Linda says:

    My situation is a little tricky. I was in an accident that was not my fault. When I called my insurance company to report the accident after I was released from the hospital a few hours later, they told me that I didn’t have collision or any kind of coverage. I argued with them for hours! They stated that they changed my policy because I didn’t submit an auto inspection a year ealier for my car, which I did. I kept a copy of the inspection and sent it to them. They then stated that they would update my insurance back to what it was and I had to pay the back pay. Fine…I cut them a check that day for the cost. I originally set my insurance up over the phone, I was told that the UM insurance was just an additional cost to what I was already being covered for. Now, I have serious and permanent injuries and they are saying they have an electronic signature waving UM insurance. Do I have a case here? My medical bills are throught the roof and the person that hit me was underinsured. Please help! Thanks.

    • fl_litig8r says:

      You should really call a local PI lawyer to see if they complied with your state law regarding waiver of UM coverage. There are often very specific requirements they need to meet.

  6. Balaji says:

    I was in a accident as pedestrian got my knee injured. Can i change my residential state from NJ to NY since it will be easy for me to go to work and also the doctor i decided to have surgery is in NY. Will it affect anything on my claims process since both are No-Fault states.

    • fl_litig8r says:

      It won’t affect anything if you move. The coverage you had at the time of the accident will stay the same. You could change insurers or leave the country now and your coverage for this accident wouldn’t change at all.

      • Balaji says:

        Thank you so much. If it doesn’t matter where i am now, do i hire attorney from NJ or NY. Also where should i file the case. Since the accident happend in NJ, do i file in NJ county or NY federal court…Please advise. Thanks in advance for you courtesy.

        • fl_litig8r says:

          I’m assuming you’re talking about the case against the at-fault driver. For jurisdictional reasons this type of claim is filed either in the state where accident occurred or where the defendant resides (if both are New Jersey, then you really don’t have a choice). Usually, for strategic reasons, it’s better to file a personal injury claim in state court, rather than federal — in fact you could file such a claim in federal court only if you reside in a different state than all of the defendants and the purported value of the claim exceeds $75,000.00.

          Because you’ll most likely need to sue in NJ, you should consult a NJ lawyer.

  7. Robert says:

    I was recently involved in a motor vehicle accident and the other driver was totally at fault. We both have the same insuracne company. My truck was deamed a total loss and i am going to paid out for it. I was taken to the hospital for left side chest pains and an agent representing the other driver has been incontact with me to take care of the medical bills and rental coverage. I have three vehicles on my policy and they are stacked. Does the insurance pay me the full amount of his personal injury coverage and will i get paid my full UM coverage for my three vehicles? Or do i have to sue someone to collect the full amount of UM coverage?

    • fl_litig8r says:

      The amount you get paid depends on your damages. See this article on valuing lawsuits. The defendant’s liability insurer is the first to pay, up to its limits or the value of your claim, whichever is lower. If the value of your claim exceeds the at-fault driver’s limits, then your UM insurer pays up to its limits (which in your case are stacked) or the value of your claim, whichever is lower. I’m a bit concerned that the defendant’s insurer has contacted you “to take care of the medical bills”. Liability insurers don’t pay medical bills as they are accrued. They want to settle your whole claim all at once, so be careful that they’re not trying to trick you into a quick settlement that only pays part of your bills. You may not even be in a position to know the full cost of your medical care (which includes future care), so settling the bodily injury (BI) claim prematurely could be a huge mistake. Dealing with them as far as rental coverage is fine, though.

      Whether or not you have to sue depends on whether you believe the insurers involved are offering a fair amount for your claim. I wouldn’t make any final settlement decisions before you reach maximum medical improvement, unless the insurers tender their full policy limits. If you want to try to settle this without a lawyer, I suggest you read my three-part article on settling your own lawsuit.

  8. Dee says:

    Hi Fl_litig8r

    My apologies for a second message as the first awaits moderation but I’m not sure if I placed the question in the proper category and wanted to add some additional info.

    My minor child was critically injured as a pedestrian in FL including a traumatic brain injury, collapsed lung and multiple fractures. We are from another state but were not even able to fly home after his weeks in the hospital due to the lung injury. The party that hit him had the minimum insurance required. It is believed that I have UIM insurance however, the insurance company is not producing the information requested and there is some serious questions about them acting in bad faith but are awaiting more info. I have a lawyer back home fielding phone calls and willing to represent me. However, I do not know if it is best to hire an attorney locally (FL) or whether to let my home attorney handle it. Home attorney believes my litigation (most likely with my insurance company) will need to be done in that states court and that FL is not very pro – victim.

    The attorney may be saying this because it of the potential monetary settlement from the bad faith claim and my insurance limits, though still not sure what they are. My gut says that I need a Florida attorney. Even if the tortfeaser has minimal insurance, I believe it important that there be some focus or judgement for negligence. I believe my insurance issues (though purchased in a different state) could probably be handled by a FL attorney? Just don’t know which state it would be litigated. I just don’t know which state would be more sympathetic to my child’s life altering injuries.

    • fl_litig8r says:

      I answered your question last night, so if it still appears to be in moderation to you, you may want to refresh your browser cache (usually hitting CTRL + F5 will do the trick on a Windows PC). You shouldn’t have any difficulty obtaining the at-fault driver’s liability insurance information, as Fla.Stat. §627.4137 requires this disclosure. As for your own insurance information, well, you should already have that.

      I gave my opinions on most of your questions in the other thread. As far as Florida being pro-victim or not, from a jury standpoint it really depends on where in Florida you’d file suit. It’s a big state, with some very conservative and some very liberal areas. The laws themselves are fairly pro-victim for the most part (like the requirement to disclose liability insurance information cited above), though there are good and bad laws as you’d find in any other state. If you are going to sue in Florida, you’d be a fool not to use a Florida attorney. Aside from knowledge of the state’s laws, you’d avoid being “home-cooked” by a local judge who likes ruling against counsel from outside his area. This doesn’t happen in most cases, but it does happen (even to Florida lawyers from a different area of the state), so getting a local lawyer is always your safest bet.

  9. Dee says:

    Thank you so much fl_litig8r ;

    I can not find my original post to see your undoubtedly wise reply and am looking forward to the information you provided.

    I’m not sure where to sue, which is my problem. The attorney from back home believes that the driver has no assets and only $10,000 in insurance. Hospital bill alone thus far is close to 15 x that much and after/future rehab will be also very costly. So they believe I will have to utilize my UIM coverage which is fine, except there is some question as to whether I have it and the insurance company is not producing information in a timely manner and may be employing some bad faith tactics. I have a personal umbrella policy as well that if all else fails will hopefully cover these expenses. But the out of state attorney believes going after the driver in Fl is moot financially but utilizing the insurance I have is the better option so they want to file in the home state to cover the mass expenses. My young teen will never be the same. I worry that the home attorney is looking out for their interests. They have done nothing to this point in gathering witness information (because they are out of state). However, they point out that if we go after my insurance coverage, it should be done so where I signed the contract. A sound argument on the surface but not sure if it’s a wise one. They have also halted work until two more contracts are signed regarding a “conflict of interest” due to a divorce issue. I’m very perplexed by this as they were fully aware of the situation when I signed the first contract with them. To uncomplicate things, I think it best to find alternative counsel but don’t know which state would be best to do so based on the theory of going after my own insurance.

    Again so sorry if you answered the majority of this. If you could guide me to the original category where I posted/you replied, I would very much appreciate it.

    Gratefully, A very sleep deprived parent….

    • fl_litig8r says:

      Your original question (and my answer) is here. I think it addresses most of the questions you raised again here. If your home state attorneys want you to sign a conflict of interest waiver with respect to a divorce issue, unless you really love this firm I’d seriously consider going elsewhere. You want the firm receiving any settlement money on your behalf to have no conflicting duties about holding that money or reporting it in a divorce matter. I’m not suggesting that you should do anything improper with respect to the divorce proceeding, but it’s better to not have the lawyer holding your money second guess your decisions due to a possible conflict.

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