Monday, March 2nd, 2015

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Do you have adequate uninsured and underinsured motorist insurance coverage?

Do you have adequate uninsured and underinsured motorist coverage? This coverage should be part of your motor vehicle insurance policy (sometimes referred to as UM or UIM/UDM coverage).  It applies when you or a family member are hurt or killed by another motor vehicle and the person causing the incident either has no insurance or inadequate insurance.  It generally would apply whether you are a driver, a passenger in a car, on a bicycle, or even walking as a pedestrian.  UM coverage through your own automobile carrier would step in to pay for your damages if you cannot recover from the person at fault.

What amounts should you purchase? Generally you should purchase UM coverage in at least the same amounts as your liability coverage. Liability coverage applies if you or a family member are at fault and cause harm or damages to others.  In the past in Ohio insurance companies were required to offer UM coverage in the same amounts as your liability coverage.  And if you rejected it or chose lesser amounts, then the rejection or reduction had to be in writing.  But Ohio law has changed and now many people are not aware of whether they have UM coverage or not.

Many drivers in Ohio do not carry adequate insurance, and of course some have none at all even though Ohio law requires that all drivers have coverage.  It has been reported that in rural areas, for example, 15-20 percent of drivers have no insurance and many others have no more than Ohio’s minimum liability coverage, which is now $25,000/$50,000.

How could this affect you?  To illustrate, assume you have purchased coverage of $50,000/$100,000 for liability and the same for UM coverage, and you are seriously hurt by a motorist who only has Ohio’s minimum coverage. If you have over $50,000 in medical bills , and have lost wages and other expenses, you may be out of luck trying to get full compensation for your injuries.  The most you can obtain from the at fault person’s insurance is $25,000.  If you make an underinsured motorist claim to your insurance company, the most your are likely to get is another $25,000 ($50,000 less $25,000, because generally you cannot “stack” your UM coverage on top of the other person’s coverage).  The person at fault may not have sufficient assets to cover the damages and may declare bankruptcy.

You also have to keep in mind that even if your health insurance company paid your medical bills they will expect to be paid back from any recovery you get.  This is called “subrogation.”  Once your health insurer is paid back, this may leave you with not even enough to cover your expenses and lost wages from the collision, such as under the example above.

Thus it makes sense to have good UM coverage.  It may also be advisable to purchase umbrella coverage for both liability and UM coverage. This is another layer of coverage above and beyond your underlying coverage.  Medical bills and other damages add up quickly when there is a serious injury.  Medical bills for serious injuries can easily exceed $100,000.
Most people pay little attention to their auto insurance coverage but it is important that you understand what coverage you have before tragedy happens.