Let’s Talk About Auto Insurance: UM/UIM

As we have already discussed you are required to hold liability coverage if you drive in the state of Colorado and most other states. However that does not mean everyone carries it. Many people do not have auto insurance which can cause a headache for you if you are in a collision with someone who is uninsured. In fact, about 13% of drivers on the road are estimated to be uninsured. So if you are in a collision with someone who is uninsured and the collision was their fault, who is going to pay for your medical bills? Well, if you don’t have UM/UIM coverage you would have to pay for this out of your own pocket. This is why it is important to purchase UM/UIM coverage. In this blog we will discuss the two separately.

“UM” stands for uninsured motorist coverage. This is the bodily injury insurance that will kick in if you are in an accident with an uninsured person and you are injured. When you purchase UM coverage you are purchasing insurance to protect you and any passengers you have in your vehicle. UM coverage does not cover damage to your own vehicle. The damage to your own vehicle would be covered by your collision insurance. UM insurance is not required to be purchased so there are no minimums, however you are only allowed to purchase UM/UIM in the same amount as your liability coverage. The average amount of UM coverage purchased in Colorado is 100/300. These numbers work the same way as was discussed in blog about bodily injury liability coverage. Each person in your car would be covered for $100,000 and the accident would be covered for $300,000 total. This means no one person can collect more than $100,000 dollars and everyone in the car combined cannot collect more than $300,000.

Although you are not required by law to purchase UM coverage, you are required by law to sign away your right to purchase UM coverage. This means that when you purchase your insurance you must sign a document that expressly states you have been given the option to buy UM coverage and have decided not to. It is incredibly important to purchase UM coverage to protect you and your family against uninsured drivers.

UIM coverage is normally bought with UM coverage. UIM stands for underinsured motorist. There is no one definition of what it means to be underinsured; rather it is dependent on the accident. If you recall the BIL limits in Colorado are 25/50. So what happens if you are in a collision and incur medical expenses of $40,000 and you are not at fault for the collision? This is where UIM coverage will kick in. The other party’s liability coverage will pay out their limit, so $25,000, and your UIM coverage should pay the balance of $15,000. In this case the other party is considered underinsured, but even someone with really good coverage could be considered underinsured. Imagine you are in a collision and it is not your fault. The accident was really bad and one of your passengers receives injuries that will keep them under medical supervision for the rest of their life, such as paralysis. Their expenses are evaluated at $1,000,000 dollars. In this case even someone who has 100/300 liability would be considered underinsured.

UM/UIM coverage is an important purchase to make in order to protect you and your passengers in accidents where you are not at fault. Tomorrow we will discuss how to protect yourself and your passengers even if you are at fault.