Underinsured Motorist Coverage: A False Sense of Protection

July 15, 2014
 
Underinsured Motorist Coverage protects me from other drivers cut rate insurance, right?
 
Wrong.
 
Unfortunately, underinsured motorist coverage is misleading. The name implies that it will cover an injured insured when the other driver doesn’t have enough coverage to pay for the damages. However, many clients are shocked to learn that their underinsured motorist coverage will not be added on top of the other driver’s cut rate insurance to pay off the insured’s damages.
 
Most insurance policies define an underinsured motorist as a driver with liability coverage lower than the amount of your underinsured motorist coverage. That means if your underinsured motorist policy limits are equal to the other driver’s liability policy limits, then you get nothing. 
 
Additionally, Wisconsin has adopted laws that permit insurers to subtract from the underinsured motorist limits amounts paid by the other driver’s insurance company and from other sources. That means, even if your underinsured policy limits are higher than the other driver’s liability policy limits, you’ll only get your underinsured policy limits minus the policy limits of the other driver.
 
Example 1
 
A nineteen-year-old driver side swipes you in the grocery store parking lot. The driver had liability limits of $50,000 per person and $100,000 per accident. You are severely injured and incur $150,000 in damages. Your insurance policy provides you with underinsured motorist coverage in the amount of $100,000 per person and $200,000 per accident. If you are the only one hurt, the maximum amount you will receive from your underinsured motorist coverage is $50,000, not $100.000. That would leave you with $50,000 to pay out of pocket.
 
Example 2
 
If the person who insured you had $50,000/$100,000 liability limits and you had underinsured motorist coverage in the same amount, then you would receive nothing from your insurance company.
 
These amounts could be further lowered provided a third party making any payments for the accident.
 
How Can I Protect Myself.
 
Increase Underinsured Coverage? Many insureds are protecting 3rd party drivers, more than themselves. When your liability policy limits are high, you protect the other driver. When your underinsured motorist policy limits are low, you open yourself up to the other driver’s cut rate insurance.
 
Review your policy. Make sure you’re prioritizing your own interests. Don’t rely on other drivers to provide you with coverage. Clair Law Offices wants to alert all of its clients to the importance of purchasing sufficient underinsurance coverage.