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What is Underinsurance Coverage and Why Do You Need it?

Posted April 07, 2017

By Jonathan A. Karon

Suppose you’re badly injured in an automobile crash due to another driver’s carelessness.  In Massachusetts drivers are only required to carry $20,000 in liability insurance. What happens if your medical bills alone are over $20,000? How will you be compensated for your time missed from work and your pain and suffering if there’s only $20,000 in available insurance coverage?

Fortunately, you can include coverage in your automobile policy to protect yourself from this situation. It’s called underinsured motorist coverage (or “underinsurance” coverage). It provides an extra potential layer of protection for you if you’re injured in an auto crash. Essentially it guarantees a minimum amount of insurance will be available to you. Unfortunately some insurance agents and auto insurers don’t do a very good job of telling people it exists.

Here’s how it works. Let’s suppose you purchased $100,000 in underinsurance coverage.  That means there will always be at least $100,000 potentially available (if your injuries and damages justify it) in coverage. So, for example, if a driver negligently injures you and only has the minimum coverage of $20,000, you can collect $20,000 from their insurance company and then there will be an additional $80,000 ($100,000 less the negligent driver’s $20,000) still available to compensate you from your own insurance company. If the driver who injures you has no insurance coverage or flees the scene before they can be identified, then the full $100,000 is potentially available.

Underinsured motorist coverage is inexpensive and well worth it. The most common available limits are $50,000/$100,000; $100,000/$300,0000; or $250,000/$500,000 (the first number is the most that’s available to any one injured person and the second is the most that’s available to all the persons injured in the crash. So, if you have $100,000/$300,000 coverage then any one injured person has a maximum of $100,000 in available insurance coverage and there is a maximum of $300,000 total to cover everyone who has been injured). I would recommend that you purchase at least $100,000/$300,000 in coverage. Although your auto insurer will also make you purchase liability coverage limits that are at least as high as your underinsurance policy coverage, this is also inexpensive and well worth it. You certainly don’t want to worry about losing any of your personal assets if you were to injure someone in an automobile crash.

If you’re entitled to underinsurance coverage, your attorney will first attempt to negotiate a fair settlement with your insurance company. If you and your insurance company can’t agree on what will be reasonable compensation for your injuries, you have the right to have your claim decided by an arbitrator.

Throughout my career I’ve seen numerous cases that emphasized the importance of having underinsurance.  In the tragic cases the negligent driver had minimum coverage and no assets and the injured person had severe injuries. Recently, I’ve had a couple of cases where my clients purchased underinsurance and it allowed them to be fully compensated. That got me to thinking that it would be a good time to remind people that they need to purchase it.

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