Most states have laws that provide underinsured motorist ("UIM") insurance, which allows the person covered by the insurance policy to recover damages if involved in an accident and the driver responsible for those injuries doesn't have enough insurance coverage.
There can be very significant differences in the UIM policies that are written by the various insurance companies and by state. In some states, UIM must offer it to their customers and car owners must carry it. In other states, UIM coverage is optional, or coverage applies unless the insured specifically rejects it.
In addition, the state UIM laws differ on when UIM coverage is used. In some states, the insured's coverage is triggered based upon terms in the insured's policy, and in some states it's based upon the policy of the driver who caused the injury.
It is critical that you understand the differences in UIM state laws and the differences in policy types. Contact an experienced insurance law attorney for additional information.
Getting or Having UIM Coverage
In states that require UIM, insurers are required to provide coverage unless you specifically reject it. Most laws set a minimum and maximum amount of coverage needed in the policy.
You may also purchase extra UIM insurance in addition to the amount you're already covered for in the basic policy, but only up to a certain amount.
Some states don't require UIM and it's an option, however, state laws say that it has to be made available to you. These laws say that insurance companies might have to provide:
- A written notice of the availability of UIM insurance
- An offer for coverage when you apply for insurance, and
- Insurers have to offer UIM when it offers uninsured motorist insurance to its customers
Automatic UIM Coverage
In most states UIM coverage is automatically included in your general car insurance policy unless you specifically reject it.
Most of the laws require that you reject UIM coverage in writing and some states require that you sign a separate agreement declining the additional coverage.
If coverage hasn't been rejected according to state law procedures, the courts will assume that you have it.
What's Not Covered
UIM coverage is triggered when your damages are more than the insurance policy of the person at fault in the accident will pay. "Exclusions" are specific things or persons that are not covered by an insurance policy. With respect to UIM coverage, the UIM laws allow insurers to make certain exclusions.
For example, UIM law often include an exclusion for government vehicles or an exclusion for claims involving an uninsured vehicle you own, or an uninsured vehicle owned by your spouse or member of your household.
In addition, insurers often make other exclusions in the policy. UIM policies often contain exclusions that bar:
- coverage of an vehicle if the uninsured motorist insurance can provide coverage for the accident (check with your state because states may vary on their enforcement of this exclusion)
- coverage if you're injured by a vehicle you own, owned by a spouse or family member not listed in your insurance policy
How Much Can Be Recovered?
Although the policy limits usually define how much in UIM benefits an insured can be paid, there are several things that can increase or reduce those amounts.
Most UIM policies allow the insurer to reduce UIM benefits by the amount paid to the insured by the wrongdoer or the wrongdoer's insurers. Some states, however, do not permit insurers to make this reduction.
If you have insurance coverage for more than one vehicle with the same company, you can use the UIM coverage from each policy to stack coverage to recover damages from one incident.
For example, you have two cars that Company X insures and you're in an accident with a UIM and your damages come out to $50,000, but each policy covers only $25,000, you can use the UIM coverage from both policies to cover all damages of $50,000.
Stacking can also come into play if the UIM law in your state does not allow you to recover UIM benefits unless your UIM coverage is more than the limits of the insurance policy of the person at fault.
Not all states allow stacking, so know your state's laws.
Claiming UIM Benefits
UIM coverage doesn't automatically begin once an accident occurs so you need to check your policy and your state's UIM laws to find out how to notify your insurance company when you want to use your UIM coverage.
Also, some states require all of the wrongdoer's insurance coverage to be "used up" before the victim's UIM insurance can kick in. Other laws require you to sue the person at fault in the accident and obtain a court order that is greater than the wrongdoer's policy limits before you can claim benefits from your own policy. This varies from state to state so check your state's laws.
Be careful about settling your claim for damages with an UIM prior to making a claim. Most policies have a consent-to-settle clause, which says you will lose your ability to claim UIM benefits if you settle without the insurance company's consent.
Finally, your insurance policy might require you to arbitrate your claim for UIM benefits. Arbitration is an informal process where a third-party or "arbitrator" will decide whether your UIM claim is valid, and the amount you can recover. Your policy should outline what has to be arbitrated and how the arbitration process works.
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