The Auto Insurance Coverage You Don’t Know You Have

Video Transcription

So, today I want to talk to you about insurance. And specifically, what I want to talk to you about is called uninsured or underinsured motorist coverage. It’s referred to as UM (uninsured motorist) or UIM (underinsured motorist). For this, we’ll just say UM. What that means is just what it sounds like. If you’re in an auto wreck and the person who hits you has no insurance, they are uninsured. If they don’t have enough insurance to cover your injuries and damages they’re underinsured.

So, what do you do in that situation?

Most people don’t realize that your own insurance policy, or the policy of the car you’re in, or the relatives with whom you live will cover you for a lot of those damages. Let’s take, for instance, let’s say that you’re in an automobile crash and the other person just has $25,000 in coverage, but your case is worth more than $25,000. What do you do?

Well, if your own auto policy for the car that you’re in has $50,000 worth of coverage you can access your coverage to the extent that it exceeds the defendant’s coverage. Confusing. Let me use a chart. So here, you see if the defendant had $25,000 you had $50,000. Ok? So, the first $25,000 of your damages comes from the defendant’s policy cause the defendant had $25,000. Your policy will pay over and above that. So, your policy will pay above that 25 an additional 25. So, in this situation, the highest block controls, you have $50,000 of coverage.

Why don’t most people know that? Mostly it’s because it’s not explained because all this happens by order of Virginia law. The Virginia law says that if you buy automobile insurance coverage, whatever your liability limits are, which means you’re protected if you’re sued, are the same as the limits to protect you in case the other person doesn’t have coverage.

So, many people understand that when you have an auto policy your coverage, if you have what people call full coverage, maybe has 3 numbers like this. 25/50/50. What does that mean? It means you’ve got $25,000 in coverage for each person that you may injure if it’s your fault. But you’re limited to $50,000 coverage overall. And the last number in that three-number sequence is how much property damage you have. Right?

Virginia law mandates that your uninsured and underinsured motorist coverage matches your liability coverage. So that $25,000 you had in case someone sues you is also available to you if you have to sue them and they don’t have any coverage.

For instance, the X here is the defendant. So, in this situation, the defendant has no insurance policy, but you’ve got some pretty bad injuries. You have a $50,000 policy. So, here’s what happens: the defendant doesn’t have to pay for his own insurance policy, your policy picks up the damages. Right?

Well, many people say, “Why should I have to use my policy when it wasn’t my fault?”

Well, unfortunately, it’s probably because the other person doesn’t have any money. If they can’t even afford automobile insurance or not much of it, they probably do not have assets or money in the bank to pay for your damages. They probably also don’t have the type of employment or job that could pay through their wages for your damages. And, besides the fact, chasing people week after week, month after month, year after year to try to pay off judgments is often more expensive than the money you’ll ever get.

And you’ve been paying the premium for this policy. Part of your premium, every single month, all of the years you’ve had your automobile policy, go to paying for uninsured and underinsured motorist coverage. Since you’ve been paying for it, why not use it? You pay for your health insurance coverage – would you not use it just because you’re worried about using your policy or that your premium may go up? Of course not. That’s why it’s insurance.

Resident Relative Coverage

Now here’s a little kicker also about this insurance. Uninsured and underinsured motorist coverage that you have also covers other people in your household that are related to you. It’s called Resident Relative Coverage. Again, your insurance agent isn’t going to talk to you about this, but it’s in the policy and it’s required to be in the policy by operation of Virginia law. The only way you wouldn’t have it is if you signed some special documentation to get rid of it. And I’ve rarely, if ever, run into anybody that’s done that. And you’d remember that!

So, you’ve got it. And all the relatives in your household have it. Now, if somebody injures you and they don’t have enough insurance you can not only use your own policy, but you can add to your policy. All of those other policies from your relatives in your home. So, if you’ve got 25 and your mom has $50,000, that 25 plus 50 yields $75,000 of available insurance coverage.

Now, you may think, or your mom may think, why should I have to use my coverage when the defendant’s fault is what caused all these damages? Well, again, part of the premium you’ve been paying is just for this type of coverage. The premiums you pay are for insurance not just for you, but for people who are riding in your car and other family members you may live with. So, why not use it?

It would be like paying life insurance premiums month after month, year after year, but then saying, when I die, I don’t want anybody using my insurance coverage. Nobody would say that to their family members. That life insurance is there so that family members can use it. In the same way, the uninsured and underinsured motorist coverage is there not only for you to use it but for your relatives to use it.

Now, a family member may say, ah, my premiums are going to go up, they’re going to cancel my insurance. Well look, that’s very unlikely to happen. I have never known anybody to have their insurance canceled because a relative made a claim on their policy for uninsured and underinsured motorist coverage. I’ve never seen it happen.

Policy amounts and premiums go up or policies get canceled because of the driver’s activities. If the driver is a really bad driver, gets a whole bunch of tickets, gets in a whole bunch of wrecks, that’s going to cause the premiums to go up and that’s going to cause policies to get canceled. Having a relative claim on your policy is not the same thing. Could it affect your premiums? Technically, yes. Does it usually? Absolutely not. But let me tell you: a couple of dollars here and there on a premium for a family member that might be out 20, 30, 40, $50,000 in medical bills? It’s easy math.

So, those premiums are there for you to use when you get injured by somebody that doesn’t have enough insurance. They’re also there for your friends who are in the car with you, and for those relatives you live with. So, use that insurance. It’s one of the great benefits out there, and you’ve been paying for it. If you have questions about insurance that we’ve talked about today, right now, or in the future, call us anytime. I’m more than happy to talk through these details with you and talk through your specific insurance issue or automobile wreck injury. Thanks for listening.