Uninsured/Underinsured Motorist Insurance Coverage in a Motor Vehicle Accident: Why It’s So Important

August 20, 2014

What is uninsured/underinsured motorist (UM/UIM) insurance coverage?  This is insurance you pay for as part of your automobile insurance policy.  It protects you in the event you are injured in a motor vehicle accident and the person who caused the accident does not have insurance or has insufficient insurance to pay you for your injuries and other losses.

Example:  Mr. X hits and injures you and you incur $500,000 in medical bills, lost wages, pain and suffering, etc.  If Mr. X has no insurance and you have no uninsured motorist coverage, you are most likely out of luck and will receive nothing.*  If Mr. X has an insurance policy with less coverage than your injuries (for example $100,000) and you have no underinsured motorist coverage, you would likely receive no more than $100,000 no matter how much your losses are.

However, if you had purchased UM/UIM coverage, your own insurance company would pay you the difference between Mr. X’s policy and the amount of your damages from the car accident as long as your UM/UIM coverage exceeds Mr. X’s policy.

Example:  Mr. X hits you and you incur $500,000 in medical bill, lost wages, pain and suffering, etc.  He has a $100,000 policy and you have UM/UIM coverage of $300,000.  Mr. X would pay you $100,000.  Your insurance company would be required to pay you $200,000 (your UIM coverage of $300,000 minus the $100,000 paid by Mr. X).  So for your injuries of $500,000, you would receive a total of $300,000.

What Is UM/UIM Conversion Coverage?
Conversion coverage is an option that your insurance company must offer you by law.  If you purchase UM/UIM conversion coverage, your insurance company must pay you the full amount of your coverage and is not permitted to reduce your coverage by any amounts paid by Mr. X’s insurance company.  In the example above, you would receive $100,000 from Mr. X plus the full $300,000 from your insurance for a total of $400,000 ($100,000 more than with just standard UM/UIM coverage).

What Is the Cost of UM/UIM Coverage and UM/UIM Conversion Coverage?
We highly recommend that you speak to your insurance company about the cost of UM/UIM coverage and UM/UIM conversion coverage (which does not cost much more than the standard coverage).  As your UM/UIM coverage increases, so does the potential for more significant compensation, particularly if you are severely injured in a motor vehicle collision.

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* For purposes of the examples given here, we are assuming that Mr. X does not have significant assets which you could pursue in addition to any insurance policy he may have.