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Automobile Insurance: What is Uninsured/Underinsured Motorist Coverage?

Having handled personal injury and wrongful death cases in Colorado since 1986, I have spoken with 1000’s of victims of automobile accidents over the years. Three questions I always ask during the first meeting are:  1) What is your automobile insurance company? 2) Does your policy include uninsured/underinsured motorist coverage? and, 3) If so, how much uninsured/underinsured motorist coverage do you have?  In my experience, most people don’t know whether or not they even have this type of insurance coverage.  And, why should they? Most folks bought their automobile insurance policy several years prior to their accident and other than paying the insurance premiums when due, haven’t  thought about the policy since. Truth be told, the majority of people I talk with really don’t understand what uninsured/underinsured motorist coverage is or how it works.

Accordingly, the purpose of this article is to explain exactly what uninsured/underinsured motorist coverage is and how it works to help you decide whether or not you want to include this type of insurance coverage on your automobile insurance policy. In case you’re wondering, I don’t sell insurance and no one in my family sells insurance. In fact, I have spent a good part of my life fighting with insurance companies.  However, in my not so humble opinion, uninsured/underinsured motorist coverage is one of the best types of insurance coverage you can buy to protect yourself and your family members.

WHAT IS UNINSURED/UNDERINSURED MOTORIST COVERAGE?

Most of us understand that automobile liability insurance provides insurance coverage to a person in the event that person is negligent while driving an automobile and causes harm to another person. If you purchased an automobile insurance policy in Colorado, then you have liability insurance coverage for any injuries you may cause to another person in an automobile collision where you were at fault. Automobile liability insurance is required by law, and in Colorado, insurance companies cannot sell an automobile insurance policy that does not include it.

Uninsured and underinsured motorist insurance, often referred to as “UM/UIM” insurance, is a type of insurance coverage that can be purchased for an additional premium when an automobile insurance policy is purchased. In Colorado, UM/UIM coverage is not required by law. An automobile insurance company selling a new automobile insurance policy for the first time is required to offer this type of insurance coverage.  However, it can be rejected by the person purchasing the policy so long as the rejection is in writing. If the coverage is declined, the insurance company is not required to offer it again at the time the policy is renewed.

Uninsured motorist insurance provides insurance coverage to you under your own automobile insurance policy when the person who was negligent and caused the car crash does not have any liability insurance. Underinsured motorist insurance provides insurance coverage to you under your own policy when the person who was negligent and caused the crash car does have liability insurance, but the policy limit is not enough to fully cover all of your injuries, damages and losses. The UM/UIM policy limit is typically the same as the liability insurance coverage limit. Insurance companies are required to offer a UM/UIM policy limit that is equal to the liability policy limit, but not more. A person can choose to buy UM/UIM coverage that is less than the liability policy limit, but not coverage that is greater than the liability policy limit.

HOW DO YOU FIND OUT IF YOU HAVE UNINSURED/UNDERINSURED MOTORIST COVERAGE?

At this point, you may be asking yourself, “Hmmm…do I even have this type of insurance coverage on my car?” The easiest way to figure this out is to look at your policy’s declaration page. Depending upon your insurance company, it might be called a “Declaration Sheet,” “Coverage Declaration,”  “Certificate of Coverage,” or something similar. It will be a page located at or near the front of your policy and it will describe the vehicles covered, the type and limits of insurance coverage you purchased and the amount of the premium you are paying for each type of coverage. The type of insurance might be referred as “Uninsured Motorist,” “Uninsured/Underinsured Motorist,” “UM,” “UIM,” or some other combination. Most people have policy limits that have a per person limit and a per accident limit. So, if you’re UM/UIM policy limit is described as “$25,000 per person/$50,000 per accident,” this means the maximum amount your insurance company will pay out in this type of coverage for one person is $25,000. The maximum amount it would pay out for one accident is $50,000, regardless of how many people were injured.  Some policies have what is known as a “combined single limit.” So, for example, you might have UM/UIM coverage with just one limit of $250,000. This means this is the maximum amount of benefits your company would pay out for one accident. However, there is no per person limit, so if only one person was injured and suffered injuries, damages and losses that had a total value that was equal to or exceeded  $250,000, that person could obtain the full UM/UIM policy limit.

What if you can’t find your insurance policy? Depending upon your insurance company, this information may also be included on the “proof of insurance” card you are required by law to keep in your vehicle at all times. Otherwise, you can call the insurance agent who sold you the policy and request another copy of your policy. Your insurance agent should be able to tell you over the telephone how much UM/UIM coverage you purchased. If you purchased your insurance policy online such that you don’t have an insurance agent, you can just call your insurance company’s customer service number and request another copy of your policy. Again, the customer service representative should be able to tell you over the telephone how much UM/UIM coverage you purchased.

HOW DOES UNINSURED/UNDERINSURED MOTORIST COVERAGE WORK?

As stated above, Uninsured motorist insurance provides insurance coverage to you under your own automobile insurance policy when the person who was negligent and caused the car crash does not have any liability insurance. Underinsured motorist insurance provides insurance coverage to you under your own policy when the person who was negligent and caused the crash car does have liability insurance, but the policy limit is not enough to fully cover all of your injuries, damages and losses. You must file a claim with your own insurance company following the accident. If the responsible driver who caused the crash had no liability insurance, then you can make a claim for uninsured motorist benefits. If the driver who caused the crash did have liability insurance, but the policy limit is not enough to cover all of your injuries, damages and losses, then can make a claim for underinsured motorist coverage. However, in that situation, you must first settle your claim with the responsible driver’s liability insurance. And, typically, your insurance policy will require that you must obtain your insurance company’s written consent prior to settling the liability claim. If you fail to obtain your insurance company’s written consent prior to settling the liability claim, your insurance company will take the position that you have waived your right to make a claim for underinsured motorist benefits.

Example: Bob buys an automobile insurance policy  from XYZ Insurance Company that has a liability policy limit of $100,000 per person/$300,000 per accident.  Bob chooses to buy uninsured/underinsured motorist coverage with same policy limits. Bob is injured in a car crash caused by a negligent driver who ran a red light. Bob suffered a broken leg that requires surgery and causes him to miss six weeks of work. After his fracture heals, Bob is left with a permanent impairment in his leg. The total value of Bob’s injuries, damages and losses is $250,000.  If the negligent driver has no insurance, then both Bob would be able to recover $100,000 in uninsured motorist coverage from his own insurance company.  What if the negligent driver did have automobile insurance, but had a liability limit of only $50,000 per person/$100,000 per accident? Then, Bob be would be able to recover the $50,000 of liability insurance from the negligent driver’s insurance company, and $100,000 of underinsured motorist coverage from his own insurance company.

As you can see from the above example, Bob is MUCH better off having UM/UIM coverage. If he didn’t have it and the responsible driver was uninsured, Bob would recover nothing for his injuries.

If he didn’t have it and the responsible driver had only $50,000 of liability coverage, that’s all Bob could recover. By having it, Bob would have been able to recover a total $150,000. It still wouldn’t fully compensate him for all of his injuries, damages and losses, but if you were Bob, you would certainly want that extra $100,000.

Part Two of this blog will give you the top 5 reasons why you should have uninsured/underinsured motorist coverage on your car.

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