Why You Need More UM/UIM Coverage Than You Think

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Since 2009, North Carolina law has required that all drivers purchase a minimum amount of uninsured and underinsured motorist coverage (UM/UIM) as part of their auto insurance policy. Previously, North Carolina required drivers to have uninsured motorist coverage, but had no requirement for underinsured motorist coverage.

Although this legislative change marked an important step toward protecting all drivers in the event of a hit-and-run incident or an accident involving an underinsured driver, it does create the unfortunate side effect of convincing many drivers that the state-mandated minimum amount of UM/UIM coverage offers enough protection for everyone.

In this article, we’ll discuss why that’s not always the right conclusion to make, and why additional UM/UIM coverage makes sense for a lot of drivers out there.

About Uninsured and Underinsured Motorist Coverage

 If you’ve never paid close attention to what’s in your auto insurance policy, you might not understand what uninsured motorist coverage and underinsured motorist coverage do. While closely related, these are actually two separate types of insurance coverage that work a little differently when it comes time to file a claim.

  • Uninsured motorists (UM) coverage provides insurance coverage when an uninsured, at-fault driver injures you or someone else who is covered under your policy. This includes coverage for a hit-and-run accident so long as there was contact with the hit-and-run car. UM insurance also provides coverage for property damage. In a hit-and-run wreck, however, the other driver must be identified in order to claim UM property damage coverage.
  • Underinsured motorists (UIM) coverage covers you when an underinsured, at-fault driver injures you or someone else who is covered under your policy. UIM coverage does not provide protection against property damage.

Wondering what an “underinsured driver” means, exactly? For insurance purposes, an underinsured driver is one whose liability limits (1) are less than your UIM coverage limits and (2) won’t cover the monetary losses incurred by the people the underinsured driver injures in an at-fault accident. If you’re hit by such a driver, your UIM coverage will pay a maximum of the difference between the other driver’s liability limits and the limits of your UIM coverage.

Most responsible drivers never think much about what they’ll do if they get hit by a driver who’s not carrying insurance or who’s carrying a minimal policy that won’t cover the resulting damages. That’s because they tend to assume (wrongly, unfortunately) that the vast majority of people on the road are reasonable and law-abiding motorists, just like them.

The facts, though, paint a less rosy picture: according to the most recent (2012) data from the Insurance Information Institute, 12.6 percent of U.S. drivers — or about one in eight — are uninsured at any given time.

RELATED: Car Accident or Crash? Why What You Call It Matters

Fortunately, 2009 legislation made UM coverage mandatory for North Carolina drivers at a minimum level of $30,000 per person and $60,000 per accident (with a $25,000 minimum for property damage for UM coverage), and combined UM/UIM coverage (equal to the liability limits) mandatory for policies with higher liability limits. But will these limits provide adequate coverage if you get in a serious accident?

Is the Minimum UIM Coverage Enough?

First, it’s important to understand how UM/UIM coverage works. As explained above, UIM coverage pays the difference between your UIM limits and the other driver’s liability limits. However, if you have a state-minimum $30,000 policy, then a $30,000 UIM policy would serve no purpose — because any other driver who has a valid insurance policy must also at least have the state-minimum $30,000 in liability coverage. This is why the state doesn’t mandate UIM coverage for drivers with the minimum liability limits, and why UIM coverage is only available at limits of $50,000 or more.

UIM coverage does become mandatory, however, when drivers select a policy with higher liability limits. If you purchase a policy with a $50,000 per person and $100,000 per accident liability limits, for example, then North Carolina mandates that your policy include UM/UIM coverage with a $50,000/$100,000 limit as well. In this case, your UIM coverage would apply if you were hit by a driver who only carries the minimum $30,000 in liability limits, and would cover the difference between the limits of the two policies — $20,000 per person and $40,000 per accident.

Although total coverage of $50,000 per person and $100,000 per accident may sound like a lot of money, we can tell you from experience that costs add up very quickly in the event of a serious crash with an uninsured or underinsured driver. Between medical expenses, pain and suffering, and lost wages, $50,000 may not go a long way, especially if you’ve suffered a severe injury that requires complex treatment or extensive therapy. In this scenario, you could easily find yourself still facing tens of thousands of dollars in bills after exhausting your state-mandated UM/UIM coverage.

We’re not the only ones who’ve come to this conclusion, either. According to Edmunds.com, auto insurance experts generally recommend that drivers purchase insurance coverage that allows for bodily injury liability limits of $100,000 per person and $300,000 per accident in order to protect their assets against lawsuits.

Since those recommendations are intended to protect at-fault drivers, you can see how they relate to UM/UIM claims: If experts believe the at-fault person in a serious crash could easily end up creating liability of $100,000 per person or $300,000 per accident, and your UM/UIM coverage provides $50,000 per person and $100,000 per accident in protection, that’s a massive gap between your coverage and the costs and the monetary losses you could be left with when the at-fault person’s policy won’t pay any more (or doesn’t exist in the first place). Not only that, but the total gap in coverage for you and others you care about could be several times that amount.

UM/UIM Coverage: Peace of Mind, at an Affordable Cost

As you can see, the modest extra cost of purchasing additional UM/UIM coverage beyond the state minimums can quickly turn into the kind of investment that preserves your financial stability if you get into a serious crash with an uninsured or underinsured motorist and find yourself depending on this coverage for help.

Fortunately, UM/UIM coverage tends to come at very affordable premiums — much less than you’d pay for standard bodily injury and property damage coverage. According to a 2016 roundup of insurance quotes from ValuePenguin, purchasing additional UM/UIM coverage of $100,000 per person and $300,000 per accident usually costs between $86 and $134 a year, depending on your insurer.

In general, we recommend that drivers seriously consider the benefits of additional UM/UIM coverage. While no one wants to believe they’ll be injured in an auto wreck, the reality is that bad things do happen to good drivers when other people’s negligence enters the equation. If you someday find yourself the victim of someone else’s recklessness, opting to purchase additional coverage now might turn out to be one of the best decisions you’ve ever made.

Contact Myers Law Firm If You’ve Been Injured

If you or someone you love has been injured in a car accident or other motor vehicle crash, you may be entitled to compensation, and the attorneys at Myers Law Firm are here to help. As a father-and-son legal team with 50 years of combined experience in the Mecklenburg County area, we know the local courts here in Charlotte.

When you choose us to represent you, we won’t hesitate to take your case to trial and defend your rights aggressively in court if necessary. We also provide free initial consultations, and we work on a contingent-fee basis for personal injury cases, which means you won’t pay any attorney’s fees unless we make a financial recovery on your behalf.

To schedule your no-risk initial consultation, please call our Charlotte office toll-free at 1-888-376-ATTY (2889) or fill out and submit our online contact form. We’ll follow up and get in touch with you as soon as possible.

 References

North Carolina Department of Insurance. (n.d.). A Consumer’s Guide to Auto Insurance. Retrieved from (http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Automobile%20Insurance_CAU1.pdf

Uninsured and underinsured motorist coverage car insurance. (2016). ValuePenguin. Retrieved from https://www.valuepenguin.com/uninsured-underinsured-motorist-coverage-car-insurance#limits-premiums

Uninsured motorists. (2016, September). Insurance Information Institute. Retrieved from http://www.iii.org/fact-statistic/uninsured-motorists