Nuts and Bolts of Uninsured/Underinsured Motorist Coverage

Everyone thinks they know what Uninsured/Under-insured Motorist coverage (UM/UIM Coverage) is and thanks to recent changes in the law, nearly everyone in Colorado has this coverage. However, the extent of this coverage's ability to affect nearly every car crash in Colorado is probably not fully understood. So I thought it would be nice to provide a little refresher on what Uninsured/Under-insured Motorist coverage is, how it works, and why it is so important.

UM/UIM coverage is a relatively simple idea. Simply stated, if you are injured by another driver and that driver doesn't have insurance or doesn't have enough insurance to fully compensate you for your injuries, then your UM/UIM policy will cover the difference. One important caveat is that the difference between the other party's insurance coverage and the extent of your actual injury will only be paid up to the limits of UM coverage under the insurance policy. Also, under Colorado law, if you have Uninsured Motorist coverage, you automatically have Under-insured Motorist Coverage and vice versa. Let's do an example.

Imagine you are in a car accident and your resulting medical bills are $50,000. The at-fault driver's insurance policy is a minimal liability policy (as required by state law, the minimum amount of coverage that a driver must maintain is $25,000).

In this scenario, there would not be enough coverage from the at-fault driver's insurance to cover your medical bills, let alone any pain and suffering, physical impairment, wage losses or any number of other damages you may have incurred. You could try to get the money from the driver's personal assets, but realistically, it is likely the driver does not have extensive personal assets for you to pursue. This is a scenario where it is critical that your auto policy have sufficient UM/UIM coverage. Let's see how this coverage works out in our scenario.

If the medical bills from your accident are $50,000 and you have gotten $25,000 from the at-fault driver's insurance, then there is still $25,000 in unpaid medical expenses remaining plus any other damages. Likely, your UM/UIM policy is equal to your liability policy, which hopefully would be at least a 100/300 policy. This means that you have coverage of up to $100,000 per person with a $300,000 limit on the total amount your policy would pay. Therefore, under the above scenario, if you were the only person in the car at the time of the accident, there would be an additional $100,000 available to you (beyond the $25,000 you received from the at-fault driver) through your UM/UIM policy to pay for your outstanding medical bills and other damages.

You may be saying to yourself at this point - "Well…this is great if I had the foresight to purchase this coverage, but I've never even heard of it before." Well, don't despair. Because of a recent change in Colorado law, you automatically have this coverage if you have car insurance and you did not waive this coverage in writing. As a result, nearly every insured driver in Colorado has UM/UIM coverage. We can help you determine whether or not you have it. Even if your insurance agent tells you that you do not have this coverage, our office would request the signed waiver showing that you declined the UM/UIM coverage. We do this because under Colorado law if your insurance company cannot produce the signed waiver, you automatically have the coverage.

You may also be wondering whether using UM/UIM coverage will cause your insurance premiums to increase. Rest assured that under Colorado law, when you use this coverage, it is one of the very few times where you can make a claim against your own insurance company and it will not affect your premiums. Insurance companies who do not abide by this law face a bad faith claim against them, which would end up costing them much more in the long run, so they are very reluctant to cross the line on this issue.

It is important to understand that in the example above we have assumed that the driver who caused the accident actually has insurance. However, it is also very common for negligent drivers to have no auto insurance at all. Thus, it is important that you review your UM/UIM coverage and seriously consider increasing your limits. The relatively small cost of the extra coverage is surely worth it.

We are happy to talk to you about your auto accident claim and we can talk to you more specifically about how to best utilize your Uninsured and Under-insured Motorist coverage. As always, your initial consultation is free.