Insurance companies love their fine print. Not to mention using confusing names for their legal entities, and their policies. But knowing the difference between uninsured and under-insured motorist coverage could mean the difference between a judgement owed and benefits paid.
What is Under-Insured Motorist Coverage?
Under-insured motorist coverage (UIM) is an optional auto insurance policy available to Michigan motorists in addition to their No-Fault coverage. Michigan law requires every driver to maintain a small amount of liability insurance. This mandatory coverage will pay up to $20,000 per person or $40,000 per accident in Third-Party damages if a driver is found to be at fault for serious injuries after an accident. Drivers may choose to purchase additional liability insurance, but many don’t.
In many cases, if your injuries are serious enough to establish a claim to Third-Party negligence damages, you will be entitled to more than the mandatory minimum coverage allows. Third-Party damages cover everything from disfigurement to long-term wage loss, as well as pain and suffering. When injuries are severe, or the person injured was a healthy, employed adult, those numbers can add up quickly. That’s where under-insured motorist coverage comes in. It pays for damages above what you receive from the at-fault driver.
Uninsured vs Under-Insured Motorist Coverage
When you are shopping for auto insurance, you will likely be offered both an uninsured motorist policy and an under-insured motorist policy. You generally will be required to purchase the same policy limit for both policies, and that amount must equal your liability insurance coverage. For example, if you want to have $100,000 available in under-insured motorist coverage, you will also have to buy $100,000 in uninsured motorist coverage, and increase your liability coverage to $100,000.
Generally speaking, an uninsured motorist policy allows your auto insurance company to stand in the place of drivers who either can’t be identified (such as in a hit-and-run), or has no insurance of their own. You can read more about uninsured motorist coverage here.
Under-insured motorist coverage, on the other hand, works in cases where a driver does have insurance, but not enough to cover your injuries. For example, if a drunk driver carrying the minimum mandatory insurance hits you causing severe injuries, you may be able to receive $20,000 from the driver under his liability policy. If your damages are $100,000, you can then file a claim for UM benefits for the remaining $80,000.
UIM Coverage Comes with Strings Attached
Receiving under-insured motorist coverage can be tricky. Most policies require you to get permission from your UIM insurance provider before settling with the at-fault drive. If you don’t, you could lose your ability to collect benefits when the recovery comes up short. Here’s what that looks like.
Using the same drunk-driving example, you sue the driver for Third-Party negligence damages. The driver has $20,000 in liability insurance coverage. His attorney contacts your personal injury lawyer and offers the maximum under his insurance: $20,000. Your attorney (knowing about the contract’s requirement) notifies your UIM auto insurance provider and asks for permission to enter the settlement. The insurance company refuses. Now, you will need to add the insurance provider to your Third Party case based on the fact that they have breached your contract to provide coverage.
UM and UIM Policies Have Limits
Unlike Michigan no-fault insurance, which continues to pay for any reasonable and necessary medical expenses related to your accident, uninsured and under-insured motorist coverage policies have limits. You can choose the level of coverage you want and pay a premium based on that amount of coverage. After an accident, both UM and UIM benefits will be capped at your coverage limit. Even if you suffer $1 million in damages, you will only receive the $100,000 you paid for. That’s why it is important to consider your potential expenses when deciding the UM and UIM policy limits that are right for you and your family.
At Macomb Law Group, our personal injury attorneys know how to make the most of your no-fault insurance benefits and any optional under-insured motorist coverage you have paid for. If you or a loved one have been seriously injured in a car accident, contact Macomb Law Group and get our team working for you.