What's Best Way to Protect against Uninsured Motorists?
Most people think first of their car when shopping automobile insurance. Can I get it fixed I have an accident? What if I ding a car in the parking lot? What if my car gets totaled? What if I hit someone's car? All valid reasons for your automobile insurance, but the other component of your coverages are about you.
What happens if you are injured?
If you are injured in an accident, depending on state laws, either your or the other party's will pay for personal injury, under the coverage provided by the policies. Typical policies provide coverage for $100,000 per person or $300,000 per accident. In the event the other party's insurance is insufficient, your policy, depending on your coverages, will pick up where the other party's fall short. But this may fall well short of needed coverage in the event of serious injury, which is where a personal umbrella policy covering personal injury can become invaluable.
What if the other driver has no insurance?
According to the Insurance Research Council, at least 16% of drivers, and about a quarter of those in New Mexico, Mississippi, Alabama, Oklahoma and Florida, are uninsured. Even among those "insured" drivers, many are underinsured. In California an "insured" motorist in the assigned risk pool can carry as little as $15,000 in bodily injury coverage per person and $30,000 per accident. If the other driver is not insured or under insured, you need to know how your auto policy and/or umbrella policy will provide you protection.
How do I protect myself?
Understand your policy and coverages, especially if you were price shopping aggressively when you got your insurance. Not all states require uninsured motorist coverage, and the types and amounts required vary widely by state.
Uninsured Motorist (UM) Coverage protects someone who has been injured in an accident caused by someone who did not have any insurance coverage (an uninsured motorist) at the time of the accident. In that situation, your insurance company will provide you with coverage for your injuries and associated losses as if they provided coverage for the uninsured motorist who caused the accident. Your insurance company assumes responsibility for the uninsured motorist's actions and provides you reimbursement for your losses such as incurred medical bills, lost wages and pain and suffering. In short, UM coverage provides you protection if you are ever injured by an uninsured motorist.
Umbrella Policy Coverage
Uninsured Motorist and Underinsured Motorist Coverages (UM & UIM Coverages) are specifically designed and intended to protect someone if they are injured in an accident and the person who caused the injuries did not have insurance or did not have enough insurance. UM & UIM Coverages are insurance coverages often associated with automobile policies and personal umbrella policies.UM and UIM Coverages provide protection in addition to general liability protection that is part of your auto insurance.
Personal umbrella policies are typically in the amount of $1M or more, and are designed to fill gaps in other coverages in the event of catastrophic events or liabilities. In the case of uninsured motorist coverage, most umbrella policies will provide coverage, but with very specific definition that need to be explained by the agent. Umbrella policies that provide uninsured motorist coverage often require that certain other insurance policies be current and in order for the coverage to be valid. This is typically a $100K/$300 or even $500K injury and liability policy under auto coverage.
Be sure of your policy definitions and coverages. Every state has different regulations, and insurance companies have been known to contest policy coverages if they think they can avoid payouts.
Do I really need $1M in excess liability insurance?
You probably need more. It sounds excessive but if you think through a few scenarios and it gets very scary, and very expensive, very quick.
If you are a mid 30's professional with 25 more years of earning potential who is disabled by an uninsured motorist, where will your earnings come from ?
What you are the one who caused the accident and the person is your friend who was in the car, how much coverage should you have?
Protect what you have worked for
Remember, just because your insurance runs out, doesn't absolve you from the liability. If the monies owed to the other party exceed your insurance, your assets are at risk, that includes not just what you have now, but potentially your future earnings as well. If it was you or your family that were injured, what you are owed will be limited to the insurance of the other party, and the $100 - 300K typical of those that do have insurance, may run out quickly in the event of a serious injury. The chances of being the subject of a lawsuit are greater than ever, and the more you own or have the potential to earn, the more you have to lose. A jury's judgment can even take away future earnings, savings, and the equity in your home. A serious injury to a breadwinner can put everything in peril. Don't risk all that you've worked for: make sure you're adequately covered and umbrella insurance is the most effective way to do it, just make sure you understand and have the correct coverages.