By Richard A. McGrath, CIC, LIA
It’s not enough to insure yourself. You also have to protect yourself from those who aren’t insured or are underinsured.
Since auto insurance is required by law in Massachusetts, anyone driving should have insurance, not only to protect themselves, but to cover costs related to an accident in case they hit someone else.
Unfortunately, not everyone obeys the law. While 49 states require auto insurance, the Insurance Research Council estimates that one out of six drivers nationally is driving while uninsured. In some states, the numbers approach 25 percent. With many people out of work or struggling to pay day-to-day expenses, the number of uninsured and underinsured motorists is likely rising.
In addition, the incidence of hit-and-run accidents has been rising, accounting for an estimated 12 percent of all accidents. Drivers who leave the scene of an accident or drive without insurance are often dangerous drivers. A driver who has lost his or her license because of an accident caused by driving while intoxicated, for example, is most likely to leave the scene of an accident because of the consequences of operating a motor vehicle while his or her license is suspended.
Regardless of the percentages, it’s wise to insure yourself against those who are uninsured or underinsured.
Uninsured motorist and underinsured motorist coverage (UM/UIM) covers the cost of your injuries if someone without auto insurance or with insufficient insurance causes an accident, if you’re hit by a hit-and-run driver or if you are hit as a pedestrian. If also covers passengers and family members, even if they drive separate vehicles.
What UM/UIM Covers
You may be thinking that you don’t need UM/UIM coverage, since health insurance usually pays medical bills related to car accidents. UM coverage pays for healthcare expenses before your health insurance kicks in. It also pays for lost wages, and “pain and suffering” damages. UIM coverage pays for damages beyond those covered by the underinsured driver’s insurance.
You may also be thinking that if damages are not covered, you can pursue the matter in court. However, drivers who don’t buy auto insurance are unlikely to have significant assets, so a lawsuit could prove to be a waste of time and money.
UM/UIM coverage is also relatively inexpensive, typically adding about 10% to the cost of your auto insurance premiums.
In many states, UM/UIM provides coverage only if the uninsured or underinsured driver is at fault. Because Massachusetts is a “no fault” state, damages are covered regardless of which driver is at fault, but you have to file a claim with your own insurer, regardless of who is to blame for the accident.
When purchasing UM/UIM coverage, it is important to understand that the coverage limits are not supplemental. The coverage limits are instead of, not in addition to, your regular auto insurance coverage.
If you are in an accident involving a driver who is uninsured or underinsured, be sure to proceed the same way you would if you were in an accident with a fully insurance driver. Exchange contact information, including the other person’s license plate number, whether or not insurance information is available. Also be certain to file a police report, including the details of the accident.
Your insurance company will investigate the claim and determine whether the other driver was uninsured, underinsured or fully insured.
Some states require insurance carriers to provide “excess coverage” under your UIM coverage and others don’t.
In states without excess coverage, including Massachusetts, the benefits you receive from your policy are offset by what the underinsured driver’s insurance pays for. If you have a $100,000 in medical bills and the other driver’s insurance pays only $50,000, you would still need $100,000 in coverage, because coverage is not cumulative and would not begin until after the first $50,000 is paid.
In states with excess coverage, the coverage is cumulative. If the underinsured motorist had a $50,000 limit and your UIM policy had a $50,000 limit, it would still be enough to pay a $100,000 ($50,000 + $50,000) medical bill.
Because Massachusetts is not an excess coverage state, an injured person has a UIM claim when the limits for automobile bodily injury liability insurance covering the responsible party (where the owners and operators are at fault) are less than the limits on the injured person’s coverage for this part and/or the coverage is not sufficient to pay for the damages sustained by the injured person.
Using the standard industry auto insurance policy, drivers cannot collect on underinsured motorist claims without first receiving permission from their auto insurance company prior to settling their claims with the other driver’s bodily injury insurance carrier. In other words, you are entitled to “underinsured motorist benefits” only if your coverage exceeds the bodily injury coverage of the driver who caused your injuries.
Uninsured motorist coverage provides protection for bodily injury when an uninsured owner/operator is at fault or when a hit-and-run accident takes place in which the owner/operator of the vehicle causing the the accident cannot be identified.
Be sure to review your UM/UIM insurance needs with your insurance agent before purchasing coverage.
Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass. He can be reached at firstname.lastname@example.org.
This article is written for informational purposes only and should not be construed as providing legal advice.