It’s important to have insurance, but having the right kind of insurance is equally important. Most people understand why insurance is necessary (and in California, required), but I often find people aren’t fully aware of what kind of insurance they have. Countless times I’ve heard people use the term “full coverage,” but there’s really no such thing. There are lots of types of insurance and ways to increase your coverage limits that it’s not as simple as being “fully covered.” This post does not cover all aspects of insurance, but it does cover a very, very important form of coverage: uninsured/underinsured (UM/UIM) motorist insurance.
What it is
Uninsured motorist coverage is insurance that protects you in the unfortunate event you’re involved in an automobile collision and the at-fault driver doesn’t have liability insurance. Underinsured motorist coverage is insurance that protects you if you’re involved in a collision and the at-fault driver doesn’t have enough insurance to cover all of your damages. These two types of coverage are generally sold together.
It’s incredibly important to carry this type of insurance and in high amounts. I see a lot of very sad cases come through my office, and some of the most tragic involve families shattered by a catastrophic injury or death of a loved one and there’s no insurance to cover the medical bills, lost income, and unimaginable emotional impact on the family. It’s truly heartbreaking. To protect yourself and your family, don’t go cheap; spend the extra money and increase your UM/UIM limits.
How it works
California law requires every driver to carry a minimum liability insurance policy covering $15,000 per person and $30,000 total per collision. This is called a 15/30 policy. This means if there’s a collision and only one person is hurt (excluding the at-fault driver), then the at-fault driver’s insurance company will pay a maximum amount of $15,000 to the injured person. If there’s a collision and three people are injured (excluding the at-fault driver), then the maximum amount the at-fault driver’s insurance carrier will pay is $30,000 total, so the three injured individuals will need to perform a pro-rata division of the $30,000 based on their respective injury claims.
Now, if the innocent driver carried uninsured/underinsured (UM/UIM) insurance, let’s say with 250/500 limits, this means that there’d be insurance coverage in the amount of $250,000 per person or $500,000 per collision if the at-fault driver is uninsured. In the above-hypothetical, the at-fault driver had liability limits of $15,000, and let’s assume it was paid out in full to the innocent driver (this is called exhausting the third-party limits). In that case, then the prudent, innocent driver who purchased the 250/500 policy would still have $235,000 in underinsured coverage available through his or her own insurance company. You might be asking why doesn’t the innocent driver have the full $250,000 available on top of the $15,000 from the at-fault driver? The answer is you get a credit of $15,000 against your own policy; it’s not a bonus. The innocent driver only purchased an insurance policy that insured him or her up to $250,000, so anything less than $250,000 recovered from the at-fault driver gets deducted from the available UM/UIM limits.
This brings up my final point for California drivers: buy more than just a 15/30 uninsured motorist policy. Purchasing this means that you’re basically only insuring yourself against people driving without insurance, and in my experience, it seems like the vast majority of drivers out there, at least the terrible drivers that are frequently causing accidents, are driving with only the minimum amount required by law – $15,000. If you’re in an accident, an ambulance ride, a couple of hours in the ER, and a few weeks off work will equate to thousands of dollars out of your pocket. And then that law requiring drivers to carry only $15,000 in coverage is going to seem very outdated. Protect yourself, protect your family, increase your UM/UIM limits.
Talk to your agent
I know this probably sounds like a plug for the insurance companies, but really, the best thing to do if you have questions about insurance is to find a reputable agent and start asking questions. I sue insurance companies. I also network a lot in my community. I know brokers, agents, claim adjusters, and insurance defense lawyers. Through my experience and dealings, there are only a handful of carriers I’d ever consider insuring my family with, and there are definitely carriers where I tell people to run. I’m not going to get into that here, but I will say that it’s very important to have a good relationship with your agent and be with a good carrier. Good carriers pay settlements on legitimate claims. Terrible insurance companies don’t. And it’s not just payments on UM/UIM claims. A reputable carrier can protect you from getting sued. If you cause a collision, you may end up getting sued one day just to find out your insurance company could have prevented the lawsuit by simply making a reasonable offer to the injured person.