The simple answer is a resounding YES! In states that offer uninsured/underinsured coverage, many people elect to choose low limits or waive it entirely as they do not completely understand the coverage itself. UM/UIM is one of the most important coverages that you cannot afford to do without.
What is UM/UIM Coverage?
UM is uninsured motorist coverage, which means your own auto policy carrier will basically "step into the shoes" of the uninsured party who caused the incident. Many people mistakenly assume that means the insurance company automatically pays out the limit; however, UM coverage does not work like that. Your injury claim is handled as though you were presenting a claim for damages to the other person directly. It is evaluated and an offer is extended, based on the value of the claim. This differs from UIM coverage, which is underinsured motorist coverage, meaning the at fault party did not carry enough insurance to properly compensate your injuries. That means there could be coverage through your own UIM policy that might be applicable to help compensate in addition to the other person’s bodily injury coverage.
How Does UIM Really Coverage Work?
Depending on the state where you live and the applicable laws, UIM coverage can be a bit tricky. What happens is your own UIM limit will apply, provided certain conditions are met, which usually involve carrying higher limits than those of the at fault party. In most circumstances, if you carry $15,00 in UIM coverage and the other party carries $15,000 in bodily injury (BI) coverage, your UIM would not apply as you carry the same coverage limits. However, if you carry $50,000 in UIM and they carry $25,000 in BI, you could potentially have up to another $25,000 to help compensate your injuries. In other states, you may even have up to the full $50,000 available in coverage. States have different regulations and guidelines as to how offsets are determined, but rest assured your agent or representative will be familiar with the states in which they do business in.
Understanding Why You Need Higher Limits
Realizing that understanding UIM offsets are better left to the professionals, just try to keep in mind - the higher limits you carry, the better off you are. Some regions such as Nevada and parts of California have very high costs for hospitalization and subsequent medical treatment. You might be stunned to learn an emergency room visit in certain trauma facilities can run $50,000. A couple days in the hospital for a non-serious injury, without any type of surgery, could set you back $200,000. Many people do not realize the insane cost of health care because you never see the "full" balance before your health insurance applies all their contractual write-off amounts with the doctors and facilities. But guess what? Many health insurance companies have a clause indicating injuries sustained as a result of an automobile accident are not reimbursed unless there is no other applicable coverage (BI, UM/UIM, etc.) or until those other coverages are exhausted. Sadly, that means auto insurance companies do not get the benefit of the contractual agreements HMOs and other plans do, which is an important reason to ensure you have adequate coverage.
With the current state of the US economy, many people are looking to forego any expenses they consider unnecessary. Unfortunately, that means many people are gambling with their auto insurance, taking the risk of driving without any insurance at all or lowering their limits to the state minimum. That makes it even more important to ensure you are adequately protected by carrying higher UM/UIM limits. You would be surprised at how nominal the premium difference is between $15,000 and $100,000, especially if you pay monthly.
So, when you are about to waive coverage while getting your next policy, take a long look at the breakdown of the premium and ask yourself - can really afford to do without it?
