Insurance of all types can be difficult to understand. This post focuses on automobile insurance, the uninsured motorist (UM) coverage mandated by law and the optional underinsured motorist (UIM) coverage and how an umbrella policy may come into play for either or both coverages.
Wisconsin law requires that every motorist carry automobile liability coverage; however, not everyone driving in Wisconsin complies with the law and the minimum coverages are small ($25,000 per person for injury or death). To address problems caused by the failure of some drivers to carry liability insurance despite the law, every policy of automobile liability insurance has to have at least $25,000 in UM coverage. That coverage serves to provide you protection if a driver who causes an accident that injures you or someone insured under your policy does not have insurance. The $25,000 limits are the statutory minimums, and not the maximums.
Underinsured motorist coverage, UM, on the other hand, provides additional coverage over and above what may be available from a party responsible for causing an accident that causes injury. By way of example, if someone causes an accident where the damages are $100,000, and only has a $50,000 liability policy, if you have an underinsured motorist coverage of $100,000, you could recover the $50,000 from the policy of the person causing the accident and an additional $50,000 based upon your underinsured motorist coverage, effectively leaving you fully covered for the accident.
Personal liability umbrella policies (PLUPs), often known as umbrella policies, may provide the opportunity to increase your UM and UIM coverage in addition to providing additional liability coverage for your auto liability policy and a homeowners policy. Most umbrella policies have limits of at least $1 million, over and above any underlying insurance that you may have.
An automobile accident can have devastating economic consequences for the injured person and his or her family. Take, for example, a situation where you are a family’s main breadwinner and are incapacitated for half a year, and will be unable to fully return to your prior level of functioning. You have incurred significant past medical expenses and are likely to face additional medical expenses in the future related to the injuries.
If you were normally making $99,000 a year, had $50,000 in past medical expenses and an anticipated $30,000 in future medical expenses, the economic damages component of that case (including six months of wage loss and the medical expenses) would be at least $129,500. This does not include any award for past and future pain suffering and disability. If the person that caused the accident had no insurance, the only recourse for compensation would be through the UM coverage pursuant to your policy of insurance. If you only carry the minimum of underinsured motorist coverage, you would only recover $25,000 and be left to seek the balance from the uninsured motorist, who can go file bankruptcy and likely has little by way of assets.
If, on the other hand, you maintained UM coverage of $250,000, you could recover up to that amount for the personal injuries and economic damages sustained. In the scenario set forth above, however, the $250,000 may still be insufficient to make you whole when pain, suffering, and disability are considered. If on the other hand there was a personal liability umbrella policy which took up the limits of the uninsured motorist coverage, there would be $1,250,000 available to compensate you for the injuries sustained.
The same type of scenario holds true for UIM cases. If the at fault driver in the scenario above only had $25,000 worth of coverage, and you maintained UIM coverage of $100,000, you would receive compensation of up to $100,000, which would not leave you fully compensated. If your UIM coverage were $250,000, you could recover up to that amount, with $25,000 coming from the wrongdoers’ policy and $225,000 coming from your underinsured motorist coverage. If you had a PLUP/umbrella policy, which took up your UIM limits is well as you UM limits, you could collect up to $1,250,000 for injuries and damages sustained.
The moral of the story is to make sure you have adequate UM and UIM coverage to protect you and your loved ones. It is not particularly expensive coverage, and is important to have in order to ensure that you can be adequately compensated in the event that someone causes injury to you through their negligence but does not have enough insurance coverage. The PLUP/umbrella policies, which normally increase limits for your auto and homeowners policies, do not automatically pick up uninsured and underinsured motorist coverages. You have to make sure that you ask for PLUP/umbrella coverage that takes the limits for both of those types of claims up. In these days where medical claims can be staggering and the loss of the ability to work or income can be financially devastating, making sure that you are adequately protected for UM and UIM claims is something that it is important to consider.
Daniel J O’Brien is a shareholder at Halling & Cayo. He has over 30 years of experience in civil litigation including personal injury, commercial, insurance coverage matters and professional malpractice. Dan represents individuals, businesses and insurers throughout Wisconsin and has tried over 100 cases before juries and been involved in hundreds of mediations and arbitrations. Dan understands that all litigation is personal and works closely with our clients and staff to provide personal attention to every case. Email Dan at [email protected]