The Importance of Uninsured & Underinsured Motorist Insurance Coverage
As we grow older, we realize how important it is to have all types of insurance coverage. From car insurance, health insurance, disability insurance, and life insurance, the list goes on.
As if that isn’t enough, we learn (sometimes the hard way) that declining certain coverage “endorsements” (additions to the standard coverage) typically means there are certain situations your insurance company doesn’t have to cover. For example, if your basement floods but you did not purchase a flood insurance endorsement to your homeowners policy, you’re most likely going to end up paying to repair that damage yourself.
Two important endorsements available on your car insurance policy are “uninsured motorist coverage” (UM Coverage) and “underinsured motorist coverage” (UIM coverage). Though they sound similar, they cover two slightly different scenarios you may face if you are ever in a car accident.
Uninsured Motorist/UM Coverage
This particular type of coverage comes into play in two scenarios. The first scenario occurs when another driver hits you or your vehicle, but that driver does not carry any bodily injury liability insurance. Although it is required by law, there are some people who don’t carry insurance because they want to save money, and think, “I’ll never hit anyone.”
The second situation in which UM coverage becomes important is a “hit-and-run” accident. When a driver hits another and flees the scene, your insurance policy treats this scenario as though you were hit by a driver without insurance. Of course, with any luck, the police will be able to locate the other driver (who hopefully has insurance). If they can’t, a UM coverage endorsement will make this stressful event a lot easier on you and your family.
If you didn’t purchase the additional uninsured motorist coverage - which your insurance company must give you the chance to decline under Iowa law - you end up in a tough position. If you declined the coverage, your only recourse becomes that person’s personal assets. Although movies and television shows lead us to believe we can “sue them for all they’ve got",” the truth is most defendants’ personal assets are “exempt” under the law. This means that for most defendants, the law prevents a court from ordering their personal assets be seized and sold to satisfy your judgment. (The procedure for this is a separate, complicated issue for another time). The bottom line: it is much more difficult to hold the at-fault party financially accountable if they do not have insurance coverage. Your best course of action is to spend a few extra dollars per month ahead of these events for the peace of mind, knowing you are covered in these situations. Otherwise, your life can be twice as difficult due to another person’s violation of not only traffic laws, but insurance coverage laws.
Underinsured Motorist/UIM Coverage
UIM coverage is similar to UM coverage, in that it is additional coverage that you can purchase to be used in place of the at-fault party’s own coverage. However, it is called underinsured coverage because it comes into effect when the at-fault party does have insurance coverage - it’s just not enough to satisfy your damages.
Iowa law requires every driver to carry a minimum bodily injury liability coverage of $20,000 per person/$40,000 per accident. (The “per person” limit applies where one person is injured in one accident; the “per occurrence” limit applies where two or more people were injured in one accident). If you are the only person injured in a car accident, and your medical bills alone are $30,000, it is unlikely the at-fault driver’s $20,000 minimum coverage will cover all of your damages (remember, there are other categories of damages you are entitled to beyond just medical bills). In order for your UIM coverage to apply, there is an important condition that must be met. The at-fault driver’s insurance company must first agree to pay the entire $20,000 limit (or you must obtain a jury verdict against that driver that exceeds $20,000).
In a variation of this scenario, this coverage can apply where a car accident severely injured you and other drivers (thus, the “per occurrence” limit is relevant). If the at-fault driver carries the minimum $40,000 in coverage, that coverage must be divided in some way among all of the injured parties. If the other parties were injured worse than you were, they will most likely get a greater portion of this $40,000. However, if you have UIM coverage, there will be more insurance funds available for your damages.
Again, your insurance company is legally required to offer UIM coverage when you purchase your insurance policy.
How do I know if I have UM/UIM coverage?
If you aren’t sure what coverage you currently have, you can usually check by logging on to your insurance company’s website. You may also request a copy of a document called a “declarations page” from your insurance company (if you don’t have a physical copy handy from when you purchased the coverage). This declarations page will show the coverage you’ve purchased, and your policy limits for the coverage available.
If your insurance coverage has denied UM or UIM benefits, you should call an attorney. If you have UM or UIM benefits, an attorney can tell you whether the reason for their denial is valid, or represent you in obtaining those benefits. If you were injured in an accident and were denied coverage because you did not purchase UM or UIM coverage, it may still be worth contacting an attorney. They can ensure your insurance company followed the specific steps required by law in confirming that you declined this coverage.