Un & Under Insured Motorists: The Most Important Item on Your Policy
December 23, 2020
It's Christmas time, and this is the time of year you think of those most important to you. There's another time of year when you should be thinking of those most important to you...it's when you are looking at your insurance policies. You want to make sure you have uninsured and underinsured motorists on your insurance policies. See why this is so important in the notes and stories below.
Auto Insurance Policy
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Every time you get in the car, you are putting you and your passengers at risk
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It's not your driving that you need to be worried about
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There are alot of crazy drivers on the road
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These crazy drivers sometimes don't abide by the law in having insurance, or they can only afford the state minimum bodily injury limits of liability
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You need to make sure you understand your coverages...see scenario below to better understand uninsured and underinsured motorists on a regular auto policy
Mary & Joe have 2 kids, Abby and Adam, and they get in their car on a Friday night to go see the Christmas lights in town. Mary & Joe have $250,000 per person and $500,000 per accident bodily injury liability limits on their auto insurance policy.
Bob is out at a bar having a good time and thinks he is okay to drive home. He can only afford state minimum limits of $25,000 per person and $50,000 per accident bodily injury liability.
Bob swerves and hits Mary, Joe, Abby & Adam in a head on collision. Mary, Joe, Abby & Adam all have to go to the hospital incurring medical bills of $60,000 each, for a total of $240,000.
Bob's insurance policy can only pay for $50,000 because that is the limit on his policy. Luckily, Mary & Joe have underinsured motorists bodily injury liability limits of $250,000 per person and $500,000 per accident. Since Bob's policy can only pay for $50,000, Mary & Joe's policy will kick in and cover the remaining $190,000 in medical bills.
Umbrella Insurance Policy
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There are two types of umbrella policies
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One without uninsured and underinsured motorists, which is the base umbrella policy and is cheaper
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One with uninsured and underinsured motorists, which may cost a few hundred dollars more
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The reason you buy an umbrella policy would of course be if you accidentally hurt someone and are liable for somewhere around $1 million (see #1 above)
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The most important reason you buy an umbrella policy would be if someone hurts you or your passengers and the other party is liable for somewhere around $1 million (see #2 above)
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You need to make sure you understand your coverages...see scenario below to better understand uninsured and underinsured motorists on an umbrella policy
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See bolded lines for slight differences from the previous story
Mary & Joe have 2 kids, Abby and Adam, and they get in their car on a Friday night to go see the Christmas lights in town. Mary & Joe have $250,000 per person and $500,000 per accident bodily injury liability limits on their auto insurance policy, as well as a $1 million umbrella policy with uninsured and underinsured motorists.
Tom is a distracted driver and looks at his phone while he drives. He does not abide by the law, so he does NOT have auto insurance.
Tom is distracted, swerves and hits Mary, Joe, Abby & Adam in a T-bone collision. Mary, Joe & Abby all come away unscathed luckily, but Tom hit the side door Adam is sitting at, and Adam is paralyzed from the neck down. Over the next 5 years, Adam incurred medical bills of $900,000.
Tom does not have any insurance. Luckily, Mary & Joe have an umbrella policy with uninsured motorists. Since Tom can't pay anything, Mary & Joe's auto policy will first kick in and pay the first $250,000 of Adam's medical bills with uninsured motorists bodily injury. After that limit gets exhausted, the umbrella policy will kick in and cover the remaining $650,000 in medical bills.
Imagine not having uninsured and underinsured motorists in either of these scenarios. You'd have to pay out of pocket for those medical bills or try to sue the other party. Both are a pain in the neck, especially the scenario where Adam is paralyzed because that is a lot of money we are talking about.
You may be thinking...why do I have to pay for this on my insurance policy? That's a great question. Like I said earlier, it's a state law to carry auto insurance, but some people do not abide by the law. Others can only afford the state minimum limits of liability. NOTE: Uninsured and underinsured motorists coverage is the cheapest item on your policy anyway. Insurance companies know that you should not be the ones who have to pay for those people who do not abide by the law or can only carry state minimum limits of liability.
You NEED to protect those important to you and your assets and get an umbrella policy. When you do...make sure it has uninsured and underinsured motorists on it. Give us a call and we'd be happy to help!
