There’s no doubt about it – auto insurance is confusing. And, you know what? Car insurance companies use confusing jargon, longwinded definitions, and niche exceptions to create an even greater power imbalance. The worst thing a driver can run into after a motor vehicle accident is the realization that they (or the driver who hit them) doesn’t have the insurance necessary to cover your claim. To protect yourself, your family, your assets, and your fellow drivers, sitting down with a qualified and experienced auto insurance agent can mean the difference between minimum coverage and the insurance coverage you truly need.
One of the most important but least discussed areas of car insurance is underinsured motorist coverage. The first point of confusion regarding underinsured motorist coverage is that there are several different monikers used by insurance companies that ultimately mean the same thing. Uninsured motorist coverage is also known as uninsured motorist coverage, UM coverage, and UIM coverage. Regardless of the name, underinsured motorist coverage is an important insurance tool to help protect you and your family after car accidents.
Let’s start with the basics, just what is underinsured motorist protection? Generally, UM insurance provides a floating layer of coverage that protects you after a car accident if the at-fault driver has no insurance or insufficient insurance to cover your damages.
Here’s an easy example. In Washington, the minimum liability limits a driver is required by law to carry is $25,000. If you are rear-ended by a driver carrying a minimum limits policy, that is the most money you can get from the at-fault driver’s insurance company. Moreover, the only way to get more money would be to win a judgment against the at-fault driver and collect the money against property or via a garnishment. Let’s say you broke your leg in the crash and ended up with $42,000 in medical bills. The at-fault driver’s insurance company offered you their available $25,000, but the at-fault driver is a single mother with no money to spare. What now?
This is where underinsured motorist insurance is a lifesaver. UM coverage “steps into the shoes” of the at-fault driver. In other words, your own auto insurance company must now provide you insurance under the UM coverage to supplement the liability limits of the at-fault driver. Let’s say – for example – you have a $100,000 underinsured motorist policy. If that’s the case, you obtained $25,000 directly from the at-fault driver’s insurance, and your own car insurance company will pay for your related damages up until the full value of the policy. In this case an additional $100,000.
The next question then becomes, do you need underinsured motorist insurance? Simply, in our opinion, yes. Firstly, UM insurance is relatively inexpensive because it the policy only activates when you are injured in a car accident and the at-fault driver has no insurance or insufficient liability insurance. Second, given the number of drivers carrying Washington’s state minimum liability insurance (and trust us, it’s more than you would think), providing yourself an extra floating layer of insurance is a no brainer.
Here’s a real-world example of how underinsured motorist insurance can save the day. A former client – we’ll call him Bob – was a passenger in a vehicle rear-ended on the freeway. His car was smashed into the vehicle in front. Glass shards from the broken windows hit his eye causing partial blindness. The at-fault driver had the state minimum liability insurance totaling $25,000. Needless to say, that insurance company paid the full value of its policy immediately. The at-fault driver was a part-time college student working as a barista to make ends meet. Bob was forced to make a UM claim against his auto insurance in order to get his medical bills paid and compensate him for his injury. Fortunately, Bob was smart, and he purchased a $500,000 underinsured motorist policy. After negotiating with the insurance company, Bob eventually walked away with the full limits of his own policy, as well.
Now, this is not to say that Bob was happy. He would have much rather had his full vision back. However, walking away with $525,000 was much, much better than the minimum $25,000 provided by the at-fault driver’s insurance company. Insurance can be incredibly confusing, and insurance companies use their knowledge of the industry to manipulate claims, downplay injuries, and leverage small settlements. Making sure you have all the coverage you need is one small way to ensure that you and your family stay safe on the road.
At the law office of Magnuson Lowell P.S., we strive to help you understand your insurance policy. Education is the key to informed decision-making. So, whether it’s sitting down with your insurance agent or with an attorney, make sure you know what you’re buying and buying what you need. Feel free to call for a free consultation (425)885-7500.