Most people are familiar with uninsured motorist insurance coverage. This type of insurance protects you when a driver without insurance hits you. There are several types of uninsured motorist coverage, but all of them are added to your own vehicle insurance.
Unfortunately, because so many drivers fail to carry insurance or only have the minimum liability insurance, additional insurance can be very expensive. As a result, drivers may choose to use the cheapest uninsured motorist insurance they can get. Doing this can come back to haunt you if you’re in a serious accident.
What Is Uninsured Motorist Coverage?
Nearly all states require drivers to carry liability motor vehicle insurance for bodily injury and property damage. In other words, if you are involved in a motor vehicle accident, whichever driver is at fault will have insurance to cover the injuries and damage. States began requiring this after too many years of litigation to cover the costs of car accidents.
Uninsured/underinsured motorist (UM/UIM) coverage is designed to cover drivers in the all-too-common event they’re hit by a driver without even the minimum required insurance. Insurance companies are businesses that won’t always cover certain high-risk drivers. Drivers with multiple DUIs, too many accidents, excessive speeding tickets, and the like cannot get reasonable insurance, so they drive without it.
Good, safe drivers faced the problem of being hit by such a driver and paying for their own damages because the other driver had no coverage. As a result, insurance companies created uninsured/underinsured coverage to protect good drivers when careless ones injured them.
How Uninsured/Underinsured Coverage Works
Uninsured/underinsured coverage is added to your regular vehicle insurance. Depending on your state, your insurance company may offer different types of coverage.
- Uninsured bodily injury may cover medical bills for you and your passengers
- Uninsured property damage may cover repairs to your vehicle
- Underinsured bodily injury may cover any medical bills that the other driver’s insurance does not cover
- Underinsured property damage may cover repairs that the other driver’s insurance does not cover
Some insurance companies may offer this coverage as a package or give you the option to have only bodily injury or property damage.
If the other driver flees the scene, this type of insurance can still be used to cover bills.
Economic Versus Non-Economic Coverage
Some states, like Louisiana, have additional UM/UIM insurance coverage.
- Non-Economic UM/UIM covers both economic and non-economic losses, such as pain and suffering.
- Limited Economic Only will cover only economic losses, such as medical bills and lost wages.
- UM/UIM Property Damage Coverage protects you against vehicle damage.
- Lowered Limits UM/UIM lets you drop your UM/UIM coverage below your personal liability insurance. This reduces your premiums at the cost of coverage.
Most states do not require drivers to carry UM/UIM insurance. However, it can be a wise investment for drivers travelling in states with a high percentage of uninsured motorists. It is a backup in case your health insurance coverage does not kick in immediately, like Medicare/Medicaid, and it protects against hit-and-run accidents where the other driver is unavailable.
Do I Need UM/UIM Insurance?
During an economic downturn, when money is tight, it may seem like extra insurance is a luxury, especially when it isn’t required to drive. However, as the saying goes. this attitude may be penny-wise and pound-foolish.
Here are some things to consider when purchasing UM/UIM.
- Do you have another way to pay for injuries? If you have good health insurance with a low deductible, then you may not need UM/UIM. However, emergency bills can be very expensive, and the reason for UM/UIM is to cover bills that your own insurance may not pay for. Therefore, if your own health insurance will not cover the cost of emergency treatment and hospitalization, you need the extra coverage.
- Do you have enough insurance to cover vehicle damage? You may not need extra coverage if you have good personal collision insurance or don’t care if your car is totalled. However, if you want to have your car repaired or replaced, you may want to consider UM/UIM property damage coverage.
- Do you live in a state with a lot of uninsured motorists? Nationwide, one in eight motorists is uninsured, but some states have more than their share. And within those states, some cities are filled with uninsured drivers. So before making a decision, check the statistics in your area.
- Will UM/UIM cover a hit-and-run? Some states, like Louisiana, will not cover property damage caused by a hit-and-run. Some, like California, will not cover hit-and-run losses at all. Make sure what is and is not covered before making your final determination.
It is always better to have insurance and not need it than to need it and not have it, but at the same time, insurance costs are high, and you should know whether your premiums are worth the cost. Do your research and ask questions before making any decision about insurance.
The Dangers of Economic-Only Coverage
One way to have the protection of UM/UIM insurance and still keep premiums down is to purchase limited Economic-Only Coverage. This coverage will pay economic damages but not non-economic damages after an accident.
Economic damages are anything with a fixed dollar value or a quantifiable amount, such as:
- Medical bills
- Lost wages and income
- Funeral expenses
Non-economic damages are injuries you may suffer which cannot be given a dollar value, like:
- Pain and suffering
- Emotional trauma
- Loss of consortium
In a personal injury claim involving an auto accident, economic damages are intended to make the victim “whole,” that is, restore them to where they were or should have been financially had it not been for the accident. Non-economic damages are meant to compensate for the injury done and the pain and inconvenience caused by the accident.
What is Pain and Suffering?
In legal terms, pain and suffering means the physical and emotional distress caused by being in any kind of accident. It is not just a way of puffing up a monetary recovery after an accident. Pain and suffering is real injury to an accident victim.
Pain and suffering encompasses nonspecific but real injuries like:
- Post-traumatic stress disorder.
- Loss of enjoyment.
- Inability to engage in daily life activities.
- Emotional trauma.
- Loss of quality of life.
For instance, someone may recover from the physical injury of a car accident, but after multiple surgeries, they may be unable to clean their home, play with their children, or spend time with friends. This loss of ability to carry out daily routines can lead to depression, anger, anxiety, and stress. All these are non-economic damages.
Why Econ-Only Insurance Is Not Enough
Non-economic damages like pain and suffering can be profound and long-lasting. Accordingly, accident victims are entitled to compensation for these injuries, and ordinary vehicle insurance makes provisions for these damages.
However, if you have chosen to waive UM/UIM insurance or have selected economic-only coverage, you will be unable to sue for non-economic damages after a serious accident. Any pain and suffering coverage will be limited to whatever medical coverage you have for yourself.
Facts and Fallacies about UM Coverage
If you have chosen economic-only UM/UIM coverage, you are still limited in what you can claim from your insurance company. The purpose of this insurance is to protect you if you’ve been hit by an uninsured motorist who was at fault in the accident, so the first thing that must be proven is the other driver’s fault. If you were at fault, this coverage would not help you.
A UM Claim Means Suing Your Insurance Company
When you file a UM/UIM claim, you will file a claim against your insurance company. This seems backward to many people and worries them that their insurer may raise their rates or find a way to drop them.
In most states, including Louisiana, it is illegal for an insurer to retaliate against you for filing a UM/UIM claim. In addition, UM/UIM insurance is considered “no-fault” insurance, so when you use it, you are not doing anything that would cause your own insurance rates to rise.
Since you can only use uninsured motorist insurance if you are not at fault, you are not filing a claim against yourself for your accident. However, if your insurance company does raise your rates, they may be liable for a refund, attorney’s fees, and other damages.
You Must Waive UM Coverage
You may need to find out whether or not you have UM/UIM coverage or what type you have. This is because UM/UIM must be offered or included in your insurance policy, and you must validly waive coverage.
In insurance lingo, you must “validly reject” coverage. For example, your agent may tell you you don’t need it when you purchase your policy (you do) or that you waived it when you signed the policy (you didn’t). You must affirmatively reject the UM coverage, whether it is economic-only or non-economic.
If you are unsure, you should contact your insurance company and ask whether you have UM/UIM coverage and what type. Ask to see your policy. You may be surprised to find you’ve been paying for something you didn’t realize you had.
Your Insurer Is Required To Investigate and Pay Your Claim
Just like when you file an ordinary insurance claim and expect the insurance company to investigate the accident and pay your bills, they also must investigate your UM/UIM claim and pay whatever claim you’ve made against the other driver.
The documentation you’re required to provide will depend on your specific policy. Still, your insurer has a limited amount of time to investigate your claim and either pay the amount or reject your claim so you can begin legal action. State laws allow for penalties and attorney’s fees if you’re required to begin a lawsuit to force the insurer to investigate your claim.
What constitutes timely action depends on the nature of the insurance and the type of claim. However, your insurance company does not have more than 60 days from the date of filing to act on your claim.
Stacking Insurance and Filing a Claim
Some states allow you to stack or use multiple insurance policies in a single accident. For instance, if you are driving another person’s car and are hit by an uninsured driver, you may be able to combine your personal insurance with your uninsured motorist insurance to cover all your losses. Stacking insurance depends on your state laws and your total losses, so you should consult an attorney before attempting to file multiple claims on your insurance.
Will I Need an Attorney for My Claim?
There are strict and complicated rules for how you must file your claim on your uninsured motorist policy compared to how you file an ordinary insurance claim. Before you can file a claim, you must establish two things:
- That you are not at fault
- That you have suffered a loss
The loss must be the type covered by your UM/UIM policy. For example, if you have economic-only coverage, you can only claim economic losses—medical bills, lost wages, and funeral expenses. If you have uninsured motorist property damage, you may only claim for property damage.
If you were at fault in the accident, you would not be able to use the UM/UIM policy. It is only intended as no-fault coverage. Determining if you were at fault in the accident can be tricky and require documentation you need assistance from an attorney to obtain.
You should take everything into consideration before deciding on what kind of additional uninsured/underinsured motorist insurance to purchase. Don’t accept an agent’s breezy assurance that you probably won’t need it. Be sure that you understand the difference between non-economic and economic coverage—non-economic coverage is the more comprehensive of the two, even though it sounds like it is not.
Remember that if an uninsured driver hits you, you could be on the hook for any damage and losses that your own insurance does not cover. Even if you have good collision insurance and health insurance, you may find yourself with extensive medical bills unless you remembered to buy a little extra insurance when you had the chance.