Uninsured and Underinsured Motorist Claims - Just how "fully covered" are you?

Posted By Shea & Shea || 28-Apr-2017

California, like most states, requires automobile insurance and proof of that insurance to drive a motor vehicle, legally. The insurance that most people think of within the confines of your auto policy is called “bodily injury” coverage. But whose bodily injury?

Liability, or “bodily injury” (BI) coverage, affords you protection if you cause a collision and injure another person, whether that person be another motorist, a bicyclist, or a pedestrian. This is the coverage that most people think of when they say: “my agent told me I have full coverage.” Under this coverage, your insurance company will settle any claim made against you up to the “policy limits” that you purchased when you bought your policy. (Hint: If you bought your policy years ago, it’s now a good idea to revisit the limits that you purchased and increase them if necessary.) In 2017, a person can legally drive a car in California with only $15,000 in BI limits. Today, $15,000 will not cover an evening in the Emergency Department.

If your insurance company determines that you are at fault for the collision, they will pay any amount equal to, or less than, your policy limits and obtain a release of liability for you from the injured party. This is often called the “indemnity provisions” of your auto policy.

If your insurance company determines that you were not at fault for the BI claim, they will hire a law firm to represent you. Your insurance company may even hire that law firm if they believe you were the cause of the accident, but do not believe that the other party was injured, or injured to the degree that they claim. This is often called the “defense provisions” of your auto policy.

But what happens if you were the injured party? And, what happens if the driver who injured you has one of those $15,000 policies? Worse yet, what happens if the driver who injured you has no insurance? This is where Uninsured (UM) and Underinsured (UIM) motorist coverage come to the rescue. It is one of the most important parts of your auto insurance policy. Here’s why: UM covers you if the other driver is uninsured. UIM covers you for the gap between the other driver’s coverage (say it’s only $15,000) and the UIM limits that you purchased—if you purchased $1m in UIM, the gap is $985,000!

The policy limits of UM/UIM coverage are usually equal to the limits of your BI coverage, but in certain circumstances, they can be less if you choose. California requires that any auto insurance policy sold in the state contain both UM and UIM coverage. Meaning, UM/UIM coverage is mandatory and cannot be omitted without a written waiver signed by you.

There are crucial distinctions between BI coverage and UM/UIM coverage. The main differences are: Cost—UM/UIM coverage is incredibly affordable compared to BI coverage with the same limits. By example, $1m in UM/UIM coverage will likely average under $200 for a 6-month policy period; Coverage—UM/UIM provides coverage to you and any other person (even a non-relative) while in your car—and UM/UIM coverage will protect you even if you are out for a walk or a run and not even driving your car; Closure—UM/UIM claims are not subject to the civil court jury trial time lines. With UM/UIM claims, there is no judge or jury but rather a single neutral arbitrator who will hear the case (assuming you cannot reach a settlement with your insurance carrier) and issue a binding decision—binding meaning there is no right of appeal; the decision is final. Arbitrations are usually far more cost effective than a jury trial. And being “outside” the normal civil court calendar means your case will quickly move to conclusion.

The most important part of your auto policy to read (everybody reads their policy, right?) is the Declarations Page. This is usually a single page toward the front of the thick packet that identifies you as the policy holder, sets forth the coverages you bought, the premiums you paid, and the policy period (when coverage starts and when it ends). Pay attention to the UM/UIM limits and notice the price differences between this coverage and the BI coverage. I think you will be amazed.

The take away thought is this: Just how fully covered are you and your family? The take away answer is that UM/UIM coverage is the best coverage for you to have because it protects you against those who fail to protect themselves. Read your Declarations Page, check your coverage and call your agent to make sure you really are “fully covered.”

For questions about catastrophic injuries or death claims, contact Shea & Shea at (408) 883-3863.

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