What Your Insurance Agent Doesn’t Tell You Can Cost You Dearly (Part II)

If you read the first part of this blog on UM/UIM insurance coverage you’re probably wondering what the heck it is and why it’s so darn important to have if you happen to drive in California. More likely you’ve typed the words into Google and already have a basic understanding. But if you enjoy the anticipation of waiting for me to get around to writing these entries, or simply have more questions, here we go:

UM/UIM is short for “uninsured/underinsured” motorist coverage. ‘Ok, what does that mean?’ you’re probably asking. Essentially, if you ever get into an accident that’s not your fault and the other driver has no insurance (or doesn’t have a big enough insurance policy to cover you for all your damages) then your insurance company steps in and pays you. What most people don’t realize after they get into an accident is that your insurance company doesn’t usually pay to have your car fixed or pay for your medical bills resulting from the collision (this does happen in the wonderful world of Subrogation but I see your eyes glazing over so I’ll keep it moving). It may seem that way because you call your company up, report the accident, then go get your car fixed and a check comes in the mail. It’s understandable since you got the money to fix your car so who cares where the check came from! And that’s a valid point. It all sort of gets lost in the shuffle. But if it’s a bad accident with serious damages and injuries, it really matters.

Let’s take an example inspired by one of my cases: Guy Gallant is driving down Santa Monica Blvd. on his way home from work and stops at a red light. Behind him, Gary Goofus* in his old beater is texting and not paying attention to the road. Gary, in keeping with who he is, bought the cheapest liability insurance limits allowed by law, $15,000/$30,000 (per person/per accident). This means that no matter how much damage Gary does with his car and no matter how badly he injures someone, his insurance company will only pay the injured person a maximum of $15,000 ($30,000 total if more than one person is hurt). ‘Well what about Gary’s personal assets?’ you may ask. ‘Can’t you garnish his wages to get more than the $15,000?’ Theoretically, sure. But that brings us back to that famous proverb from Part I of the blog…the thing about getting blood from a stone. I mean, we all have a Gary Goofus in our lives. And a few unfortunate souls are surrounded by them. You know, the one who always ‘forgets’ his wallet – but he’ll get you next time. The one that’s always crashing on someone’s couch because he’s always getting evicted for not paying his rent. The dude who ducks child support payments like he’s in the Matrix. Even if you do win your court case against him and get a large judgment, good luck collecting! That judgment won’t be worth the paper it’s written on.

So back to our story, even though I’m sure you can already guess what happened. Mr. Goofus, still texting and not slowing down for the stopped cars in front of him, slams his beater into the back of Guy’s car. Guy, not expecting any of this, gets tossed around his car like a rag doll with his neck snapping back and forth violently. Both cars are wrecked. Guy is in immediate pain. They call the police. An ambulance takes Guy to the hospital where they check for fractures but don’t do any more intensive testing. If nothing’s broken they just release him with a “whiplash” diagnosis and tell him to see his doctor if the pain doesn’t go away. A few weeks pass and the pain only gets worse. Guy goes to see his doctor who sends him to physical therapy. A couple months of that doesn’t improve his symptoms so he gets a referral to an orthopedist who sends Guy to have some MRI’s done. The scans reveal a herniated disc in his neck. He’ll likely need surgery. But that costs money. And even with that Guy is looking at a lifetime of disability and pain. Gary’s insurance company already offered its $15,000 limits and washed its hands of this case. Gary won’t be asked to contribute anything because that would be pointless. The $15,000 won’t even cover Guy’s surgery. What about his other medical care? What about all the work he’s missed? What about the worst part of all this – Guy’s inability to enjoy his life because of the constant pain he’s in – who’s going to pay for that?

And this is where UM/UIM coverage comes in. If Guy asked his insurance carrier to add that coverage when he was buying his policy it would cover all of his damages over and above the $15,000 paid by Gary’s insurance. For example, if Guy had UM/UIM coverage of $100,000/$200,000 (per person/per accident) he would be entitled to $85,000 from his insurance company to cover his medical expenses, missed work, and pain & suffering ($100,000 per person limits minus $15,000 paid by Gary’s insurance). If Guy really wanted to protect himself and his family he would buy the highest available UM/UIM policy limits, usually up to $1 million (anything above that normally requires buying an umbrella policy). It’s important to note that insurers usually require you to carry liability coverage that is higher or equal to your UM/UIM limits.

The greatest thing about UM/UIM is that adding this coverage to your insurance policy is relatively cheap – only a few dollars a month – compared to what you’re getting in return: Actual protection and the peace of mind in knowing that no matter what happens on the road you’ll be able to financially protect yourself and your family in most circumstances. 

* Names have clearly been satirized to protect the guilty.