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You are a law abiding citizen. You know that you have to have an auto insurance policy in place to get the Tag for your car. Your state requires you to carry liability insurance. In fact you know that when the blue lights flash behind you, and you are stopped for a speed violation, the officer can readily tell if you have insurance.

     So, if it is the law to carry insurance ,why do you need Uninsured Motorist, UM Protection or Underinsured Motorist Protection, UIM? First, there is a definite possibility that the driver you share the road with has been less than conscientious. He may have had insurance at the time he got his tag, but that pesky monthly premium was never paid. About 14 % of all drivers on the road have no insurance. Then there is a second group equally scary who have the minimum level of insurance required in the state they live in , but do not have enough to cover the injuries they may cause.

     If we think of the entirety of Uninsured and Underinsured Motorist Coverage the Uninsured Motorist, UM issue is huge. UM is one of the least understood and most important parts of your auto policy. If you have too little coverage it is now you, your family and your passengers who will suffer.

    A few scenarios will help paint the picture of how this affects you:

1.      The at fault driver bought the policy when he got the tag and let the policy lapse. It happens all the time. There is no viable coverage in place and his or her assets are nominal. For all practical purposes the guilty party is “judgment proof”. You could pursue in court, but you never would realize any beneficial outcome.

2.      Everyone thought there was coverage, but they were mistaken. Permissive use has been allowed to establish a chain of control of the vehicle to include access to the owner’s liability insurance. However the owner may have purchased a deeply discounted and often nonstandard insurance policy that prohibits any permissive use driver form having coverage unless specifically listed on the policy declarations page.

3.      The driver may be in the US illegally and has not obtained insurance as he or she is avoiding any contact with authorities that might detect their illegal status.

In each of these cases you may be looking for relief from your own insurance policy. But the situation gets worse….I have seen this first hand many times. One of my own daughters was in a turn lane waiting for her turn, not protected by an arrow signal. This occurred in a highly urban area, Los Angeles. In less than 5 seconds her world changed. A driver speeding, changing lanes and running the red light hit her and then careened into a group of pedestrians, killing two at the scene and a third months later. Yes, the at fault driver had insurance, but that was exhausted at the scene.

So here is the scoop on UM, it is difficult to price. For example to rate your liability exposure, an insurer can weigh in the car you drive, your driving record, the financial responsibility you show with credit, your education levels, frequency of the car being on the road etc.  The list is long and the algorithms complex that produce an adequate rate.

By its nature UM is not nearly as precisely rated. Your propensity to be a victim is dictated in part by usage, traffic density, your income level, but also fair degree of bad luck or misfortune. You are driving along and the next thing you know you are off the road and severely injured.

How should you proceed to be an informed buyer of UM?

First look at your existing policy. If the limit of Bodily Injury Liability Coverage is greater than UM Bodily Injury you are not taking care of your own family, passengers and yourself. Why would you protect the general population of people you might injure better than your own family? Whether you buy Split Limits of Liability Coverage or Combined Single Limit of Liability Coverage be sure it is matched by your UM. When in doubt, buy the same limit.

Lastly, you might feel especially well protected if you have an umbrella policy. It provides liability coverage over and above your auto and homeowners insurance. But here is what is often overlooked…..an excess layer of Uninsured Motorist coverage. Remember the maxim, when in doubt buy the same limit. Many insurers refuse to sell UM equal to the umbrella limit.

Look around and find a company that does sell Excess UM. If you have the assets and future income to protect with an umbrella, you have the assets and future income to protect as the victim of an uninsured or underinsured motorist.

©Copy right Jack Heller, CPCU 2012. All rights reserved.

Jack Heller, CPCU is an Entrepreneur and knowledgeable in Personal Insurance with over 30 years in Insurance Company and Agency Management. Formerly he was President and CEO of Sothern Heritage Insurance Company and principal founder of two other insurers.  He is President and CEO of Insurance Browser Inc. an on line insurance agency with offices in Atlanta GA and Austin TX, doing business in AZ, CA, GA, TX and MO .See www.insurancebrowser.com 

Posted 3:29 PM  View Comments

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