UM/UIM Coverage: Pay Now, Avoid Heartbreak Later

Odds Are Everyone Still Needs More Coverage

If you parse it down to its most basic elements, any successful auto collision case comes down to three things: (1) a negligent driver, (2) damages caused by the collision and (3) available insurance coverage. The last one is barely talked about in law school classes. A lot of time is dedicated to complex causation issues and complicated fact patterns to tease out which party is negligent. Both are important issues and essential to understanding the practice of tort law. Yet, I do not recall ever sitting down and reading through an auto insurance policy and discussing the ramifications of how much liability coverage was available. I was not taught what uninsured/underinsured (UM/UIM) coverage was nor how stacking insurance policies works or what minimum limits are. And these are just a few topics a personal injury attorney may deal with daily.

Having a fundamental understanding of how insurance works and what it means for our clients’ cases is one of the most important skills to have when handling an automobile claim as a personal injury attorney. That is because the harsh reality is that most injured plaintiffs’ only source of recovery is tied directly to the insurance policies that are at play in their case. And in some cases, especially those cases with serious injuries or wrongful death, the insurance coverage falls woefully short of compensating them fairly. Plaintiffs are limited to any liability coverage and/or uninsured or underinsured coverage available.

Sure, there are those straightforward cases where an at-fault driver has a sufficient policy with plenty of coverage that will result in a great recovery for the injured party. However, as any personal injury attorney finds out quickly, that is not the case for many of our clients. Rather, clients find themselves in situations where the liability coverage is insufficient. It is in these moments that we must have some of the hardest conversations with our clients.

During these conversations, we often have to explain to our clients that although they or their loved ones are seriously injured or killed in an automobile collision that was not their fault, there is only a limited amount of money available for their recovery. Sentiments repeated in these conversations time and time again are:

• “Why did I not know about uninsured or underinsured coverage?”
• “Why didn’t my insurance agent explain this to me?”
• “This is my first accident; I had no clue that is how it worked.”
• And simply, “This is not fair.”

The overall feeling is one of disbelief and even shock. It is a heartbreaking conversation. And that heartbreak is deepened by the knowledge that every driver can protect themselves and their families by purchasing a policy with higher UM/UIM coverage.

What Can We Do to Best Serve Our Clients?

We can encourage our fellow North Carolinians to purchase policies with sufficient liability coverage and uninsured/underinsured coverage. It is arguably the most important part of any insurance policy that a driver can buy. Driving can be risky, and collisions with uninsured and underinsured motorists happen daily. Drivers cannot guarantee that someone else on the road has enough insurance or even has insurance at all. However, drivers can ensure that they do. Most responsible drivers may believe that all other drivers are following the law and purchasing insurance. That simply is not true. Unfortunately, uninsured drivers are more prevalent than one might think. According to the most recent data from the Insurance Research Council, one in eight (12.6 percent) U.S. drivers are uninsured at any given time.¹ Additionally, uninsured drivers are not the only risk to injured drivers. Other scenarios where UM/UIM coverage may become essential in a case are: hit-and-run collisions, exhaustion of liability coverage, coverage denied based on lack of endorsement for ride-sharing vehicles, lapsed coverage, and out-of-state drivers with minimum limits, just to name a few.

It is important that drivers understand how UM/UIM coverage works. As a refresher, here are some basic principles:

Liability coverage: An at-fault driver’s liability coverage will pay for both bodily injury and property damage for which any covered individuals become legally responsible. The policy will pay up to the limits listed in the policy. In North Carolina, drivers are legally required to carry an auto insurance policy with minimum limits of $30,000/$60,000/$25,000 for bodily injury and property damage coverage.² These are called split limits and mean that a minimum limits policy would pay up to $30,000 for one person injured by a covered driver or up to $60,000 for all injured parties combined and up to $25,000 for property damage. It is not hard to imagine that these limits will become exhausted quickly. And remember, some negligent drivers do not even have insurance.

That is where uninsured/underinsured coverage comes into play. In 2009, North Carolina made changes to the Motor Vehicle Safety and Financial Responsibility Act.³ This change in law made UM/UIM coverage mandatory when purchasing a policy in North Carolina. This was a step in the right direction to begin to fully compensate injured parties. Uninsured coverage is available beginning at $30,000 per person. Underinsured motorist coverage is available beginning at $50,000 per person. Policyholders are free to increase this coverage if they so choose, up to $1 million.

Uninsured motorists: UM coverage will provide protection when an uninsured driver, who is at fault, injures any covered individual in the collision.

Underinsured motorists: UIM coverage is designed to cover the gap in coverage when the at-fault driver does not have enough insurance to cover the cost of the injured party’s damages. UIM insurance would then kick in to cover up to your policy limits, which is why drivers should be encouraged to have generous limits on their policy.

An example of how UIM works:
For UIM policy limits of $50,000 — if a driver’s UIM policy limit is $50,000 and they receive $30,000 from the at-fault driver, they might be eligible to collect up to $20,000 in additional compensation, depending on their medical bills and costs and whether the at-fault policy has been exhausted. Unfortunately, even if the bills exceed $50,000, the $20,000 difference between the at-fault driver’s payment and the UIM policy limit is the maximum an injured policyholder could potentially recover.

Unfortunately, and as discussed previously, the average driver does not expect to become the victim of the uninsured or underinsured negligent driver and many purchase minimum limit coverage policies.

How Can We Begin to Change This Narrative?

First: Encourage and educate current clients on the importance of reviewing their insurance policies and purchasing additional coverage if their current policy falls short. Clients can change their insurance coverage at any point, even during the duration of their cases. This, of course, will not change the realities in the pending claim, but would certainly make a difference for any future claims.

Each individual and their families will have different needs, accessibility and resources to purchase more auto insurance. However, once people truly understand the devastating consequences of being underinsured, they most likely will want to take action. We have armed them with the knowledge of the power to make a positive change.

A couple helpful facts to know when talking with clients about insurance coverage:
The costs of UM/UIM coverage are relatively cheap. UM/UIM coverage is significantly cheaper than the price of liability coverage. According to ValuePenguin, purchasing a minimum limit UM/UIM policy costs a 34-year-old married man $33 to $76 per year, and for a policy with four times the coverage — limits of $100,000/$300,000 — the premium only costs between $86 and $134 per year.⁴ The minimal investment of purchasing additional UM/UIM coverage can quickly turn into one of the best decisions our clients have made and allow for financial stability in the case of serious injury and limited liability coverage.

The costs of medical bills are high. According to one statistic, the average hospital bill following a car collision is around $60,000.⁵ And that is just the hospital bill — that does not take into consideration the pain and suffering and low wage damages available to people injured in a car wreck.

Some auto insurance experts generally recommend that drivers purchase insurance coverage that allows for bodily injury liability limits of $100,000 per person and $300,000 per accident in order to protect their assets against lawsuits.⁶ But, remember, North Carolinians can purchase up to $1 million in coverage. The decision on how much to purchase will depend on a number of factors. As advocates for our clients, take the opportunity while you are serving your current clients with their cases to walk them through the importance of UM/UIM coverage and help them make a decision about what is best for them.

Also, spread the word in your community and among your family, friends and even fellow attorneys about the importance of insurance policies and the ramifications if they carry minimum limits. This could include blog posts, appearances on local news channels or social media sites and even small talk at parties. Who doesn’t love a riveting conversation about car insurance at a dinner party among friends who are just getting back together after a couple years of isolation?

With all jokes aside, this topic is an important one that does not get enough attention among everyday consumers of automobile insurance. I believe, as advocates for those injured in North Carolina, it is our responsibility to help spread the word. This is exceedingly timely as people are getting ready to travel for the holidays or are getting back into their normal rhythms of commuting back into offices all across this state. Let’s replace those heartbreaking conversations about the lack of insurance available in someone’s case to congratulatory ones where we get to tell our clients that they did an excellent job purchasing enough insurance to sufficiently cover their injuries caused by a negligent driver.

Resources:
1 Insurance Research Council, News Release (March 22, 2021), www. iii.org/fact-statistic/facts-statistics-uninsured-motorists.
2 North Carolina DMV Insurance Requirements, www.ncdot.gov/dmv/title-registration/insurance-requirements/pages/default.aspx.
3 N.C.G.S § 20-279.21.
4 Mark Fitzpatrick, Uninsured and Underinsured Motorist Coverage Car Insurance (Jan. 7, 2022), www.valuepenguin.com/uninsured-underinsured-motorist-coverage-car-insurance#limits-premiums.
5 Mark Fitzpatrick, Uninsured and Underinsured Motorist Coverage Car Insurance (Jan. 7, 2022), www.valuepenguin.com/uninsured-underinsured-motorist-coverage-car-insurance#limits-premiums.
6 www.edmunds.com/auto-insurance/how-much-car-insurance-do-you-need.html.