Uninsured/Underinsured Motorists Coverage

Today, many motorists drive without insurance or carry limits of liability that are grossly inadequate.  When one of these drivers causes an accident, the victims may not be compensated for their loss.  The insurance industry has developed two coverages designed to indemnify the innocent victims for the loss caused by an uninsured or underinsured driver.

The purpose of the coverages is to put the victim in the same position as if the motorist who is legally liable had bodily injury coverage sufficient to pay the damages.

Uninsured Motorist coverage provides compensation to insureds who have suffered bodily injury in an accident with an at-fault motorist does not have any bodily injury liability insurance.  The coverage also applies when the victim is injured by a hit and run vehicle or if the insurance company covering the at fault driver either denies coverage or become insolvent.  A second coverage, Underinsured Motorist coverage, is activated when the at fault driver has some coverage, but not enough to cover all the damages of the accident.

With an increasing number of uninsured and underinsured drivers on the road, the prudent person is buying limits for Uninsured and Underinsured Motorist coverage equal to the liability limits found on their auto insurance policy.  In addition, many people endorse excess limits of Uninsured and Underinsured Motorist coverage on to their Personal Umbrella Liability policy.

In a perfect world, everyone who owns or drives a car would insure it for substantial limits of liability.  In the real world, we cannot assume this is the case and today drivers need to enhance their own auto policy by adding Uninsured and Underinsured Motorist coverage.

How an Umbrella Works

Odds are you will never be sued for a million dollars.  But, what if you were?  What if your teenager caused an auto accident leaving a passenger in the other car permanently disabled?  And then what if the injured person sued you for $1 million and won.

How much liability coverage do you have under your auto policy?  Would it be enough?  If it is not enough, where would the money come from?  The fact is, you could lose everything you own and continue to pay for years to come.

The chances of this happening to you are not very great:  that is why insurance to cover the exposure is so affordable.  A Personal Umbrella liability policy can usually be obtained for less than $150 a year (Standard premium based on one home and one auto).  That same amount will only pay for the services of a good attorney for less than an hour.

A Personal Umbrella policy sits on top of other insurance that includes liability protection, such as your auto, homeowners and boat policies.  When coverage under these primary policies is not enough, the umbrella policy is triggered, spreading protection (hence the term “umbrella”).

Only you can decide how much liability coverage is right for your family.  In making that decision, you may want to know what an umbrella should cost in your particular situation.  Call your agent and get a quote.  Then you can make an informed decision.

Liability: Peace of Mind Coverage

The liability promise is the biggest commitment an insurance company can make.

“We will pay up to the limit of liability for the damages for which the insured is legally liable”

Liability coverage is designed to pay when an insured hurts someone or damages another’s property.  The “damages” referred to are those sums paid to the claimant, the person who has sustained damage.

·         A neighbor slips and falls on the ice on your sidewalk; you are liable for their damages

·         Your teenaged son loses control of your boat and collides with another; you are liable for the damages

·         Your over-active eight-year-old propels a loaded shopping cart down the aisle, hitting a little old lady and sending her flying; you are liable for the damages

In addition to paying the damages for a covered loss, your liability coverage pays for all the attorney fees and defense costs.  With most liability policies, the entire limit of liability shown on the front of the policy goes to pay damages; defense is paid in addition.  Today, the cost of defense is often more than the amount of the damages.

There are always expenses involved with a liability claim:  claims expenses, investigation expenses, and court expenses.  A liability policy will pay for these and the payment does not come out of your policy limit.

As with any insurance contract, there are exclusions in a liability policy.  Generally, liability policies do not cover intentional damage.  In addition, a homeowner’s policy does not cover any business-related claim.  An auto policy excludes coverage when carrying people or property for hire.  When buying an insurance policy that includes liability, you should always ask what is excluded.  But, despite the exclusions, the coverage provided by a liability policy is very broad.

There is liability coverage on an auto policy, a homeowner’s policy, and a recreational vehicle policy.  You can also purchase a Personal Umbrella liability policy which provides excess limits.  One of the most important insurance decisions an individual makes is the amount of liability coverage.

The liability promise is the biggest promise an insurance company can make.  It is true “peace of mind” coverage

How much is enough

With liability insurance, you are offered the opportunity to transfer a portion of the risk of being sued; only you can decide how much of that risk you should transfer.  The experts say there are four factors everyone should take into consideration when making the decision:

·         What do you have to lose?

What are you saving for?  Retirement?  College?  A dream vacation?  How would you feel about turning your savings over to a total stranger?  Would you be able to continue to save if you had to pay an uncovered judgment?

·         How likely is it to happen to you?

Some people are more likely to face a large lawsuit.  Do you have teen-aged drivers, recreational vehicles, a swimming pool or a dog?  Are you active in the community or visibly successful?  Do you coach little league or play bocce ball?  Some people have more exposures to loss than others

·         What will it cost?

Higher limits of liability are usually affordable; your agent will be able to tell you the cost of increasing the limits on your policy.  Then, call a good defense attorney and ask what he would charge to defend you if you were to be sued for more than your limits.

·         How do I feel about risk?

Cautious people transfer more risk to an insurance company; risk takers are comfortable taking their chances with lower limits.  Remember to consider the risk tolerance of your entire family.  How would the dynamics of your family change if you faced a liability claim that was only partially covered?  Would your family’s sense of security be threatened if you were sued for more than your limit?

Only you can decide how much liability is right for you.  Consider these factors, make a decision, and adjust your insurance to what you consider appropriate for your circumstance.  Remember, today you do not have to be a millionaire to be sued like one.