Today, let’s talk about underinsured motorist coverage. This is actually a really confusing subject. A lot of people — in fact, even a lot of lawyers — don’t understand underinsured motorist coverage. So, let me break it down for you.

What Is Underinsured Motorist Coverage?

Underinsured motorist coverage is coverage that you carry on your policy to protect you when you are hit by someone who’s driving around with not enough insurance on their own policy.

Indiana requires motorists to carry policies of insurance with liability coverage of no less than $25,000 per person, or $50,000 per accident. That means, if you’re hit by somebody who’s at fault for an accident, their liability coverage is supposed to step up and pay you for your damages and they have to have at least $25,000 worth of coverage on that policy to pay you.

How Underinsured Motorist Coverage Works

Here’s how underinsured motorist coverage works: let’s say that you’re involved in an accident, have suffered bodily injuries, and the total amount of your damage is $100,000.

The person who hit you has a $25,000 per person liability limit policy, which is the minimum amount required by law. You, in turn, have a fifty-thousand-dollar underinsured motorist coverage on your own policy. So we’re going to use these two policies to try to pay you as much as we can of that hundred-thousand-dollar damage you have incurred.

First, the at-fault party’s liability coverage is going to step up and pay you $25,000. That’s the limit of their policy for your bodily injuries that total a hundred grand. This leaves you with a $75,000 shortfall.

Now you turn to your own insurance company and you’ve got a fifty-thousand-dollar policy there. This is where it gets confusing. You would think that you can turn to your own insurance company and get $50,000 more, because, after all, you’ve suffered $100,000 in damages.

A Nasty Surprise

But Indiana law allows your own insurance company to deduct from your coverage the amount that you recovered from the liability carrier. So, when you’re carrying $50,000 in underinsured motorist coverage, what you are being insured for is that you will have no less than $50,000 available to you for your injuries from all sources of insurance.

This means that you get $25,000 from the liability carrier, and then you only get another $25,000 from your underinsured motorist coverage. That’s $50,000 in all, and it leaves you with a $50,000 shortfall because you have $100,000 in damages. It certainly seems unfair.

What Most People Don’t Understand

What people don’t understand is that when they buy their insurance policy, they have to purchase enough coverage to make sure that they recover all that they need to recover to make themselves whole.

When it comes to buying insurance, you’re often insuring your own self more than you are insuring someone else. So, when you purchase your insurance coverages, make sure you purchase underinsured motorist coverage as well as uninsured motorist coverage. Indiana requires your insurance company to include it in your vehicle policy unless you specify in writing that you don’t want any uninsured and underinsured motorist coverage.

What Can Happen If You Purchase Your Insurance Online

Lately, with everybody purchasing their policies online and by e-signature, we’ve seen that insurance companies have been playing it fast and loose with gaining the required waivers in writing that people don’t want these coverages. Whether you’re purchasing online or in person, make sure that you purchase the coverages that you want and need, and that you understand what you’re paying your premiums for.

What You Should Do

If you’re in an accident and you’re facing these issues of whether the other party has enough insurance to compensate you for your injuries, reach out to me. We’ll get on the phone, and I’ll help you out.

We’ll make sure we are accessing all the insurance that’s available to you. We’ll also make sure you’re taking full advantage of all the coverages that you have not only purchased but that you’re entitled to receive according to the law.

Stay safe out there, enjoy the ride and we’ll talk again later.