Underinsured Motorist Coverage – What You Need to Know

Buying car insurance is usually considered a no-brainer. You visit your insurance agent, give them information about your vehicle, and based on the type of car you have and how old it is, he recommends a policy that will cover your losses if you get into an accident. Easy, right?

Not so fast. Most of us never think much about what coverage we have. Our biggest concern is how much our policy will cost us every year, or every six months, or every month. As long as it is affordable, and our agent tells us we are protected, that is all we care about. But there is more to think about that your agent may never discuss with you.

Recently, a client was severely injured when he was hit by a car while a pedestrian. His auto policy had perfectly adequate coverage for damage he could cause in an accident, but this accident was not our client’s fault. And, unknown to him, his underinsured motorist coverage (UIM) was very low because he had lowered the coverage at the suggestion of his agent. What does that mean exactly?

Underinsured motorist coverage is protection for you when the responsible party in an accident has coverage limits that are too low to cover your expenses or to reimburse you for your pain and suffering. The driver in this case had a respectable amount of liability insurance, but our client’s injuries were so severe that the driver’s insurance limits were not nearly enough, particularly because his workers’ compensation carrier was entitled to reimbursement of its enormous lien. This is where underinsured motorist coverage comes in, or should come in. In this case, the UIM coverage was “stacked” at $50,000 per vehicle giving him a total of $150,000 in UIM. Doing some simple math shows you that, after paying off the lien, there was very little left for our client’s pain and suffering.

This was a wake-up call for me, prompting me to review my own policy. I had only $25,000 in UIM coverage per vehicle, because my agent had suggested it. I quickly increased it to $100,000. My premium did go up, yes, but by only $124 per year for two cars. This is a no-brainer. For a whopping $10 per month, I increased my protection dramatically. And so should you.

Pennsylvania law requires that drivers maintain only $15,000 in liability coverage. Most people don’t carry that little, but many do. And if they injure you, you need to be prepared to protect yourself financially.

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