What is UIM Coverage & Do I Need It?
If you’re involved in an auto accident that isn’t your fault, the liability insurance coverage of the other driver may not be enough to cover all of your costs – especially if you have injuries that interfere with your everyday life. And even if you’re able to get a timely payout from the insurance company, the policy limits are often too low to provide fair compensation. UIM Coverage, or under-insured motorist coverage, is coverage that you can add to your own policy that fills a gap between the at-fault driver’s liability insurance, or lack thereof, and your actual amount of damages.
In Washington State, the law requires drivers to guarantee financial responsibility in case they are ever liable for an auto accident. In Washington State, the minimum liability coverage requirement is $10k for property damage and $20k for bodily injury expenses per person ($50k total for all persons involved). This means that if your accident related costs from medical bills, lost wages, and other life interruptions add up to over $20k, or if your vehicle damage is over $10k, you won’t be fully compensated by the other party’s insurance (third party insurer). There is also the possibility that you could be hit by someone without auto insurance. A study by the Insurance Information Institute found that as of 2019, Washington had the fifth highest rate of uninsured drivers in the country; 21.7% of drivers in Washington State were uninsured, compared to the national average of 12.6%.
Unfortunately, in cases where liability insurance policy limits are too low or nonexistent, trying to collect for damages directly from the individual is frequently unsuccessful. Many individuals, especially those who are underinsured, won’t have the assets to pay you, and the process of collections is expensive. If you are injured by an uninsured driver or if your costs are higher than the other driver’s insurance liability limits, UIM coverage on your own policy will help you get full compensation for your damages in the accident. For example, if the at fault driver is covered with the minimum bodily injury liability limit of $20k, and your damages from injuries sustained add up to $44k, you can claim up to $24k through your UIM coverage. Another benefit of UIM coverage is that it will pay for damages incurred by a ‘phantom driver’ – an at-fault driver who left the scene before they can be identified. In this type of accident, documentation is key, and you will need to report the accident to the police.
Under state law, UIM coverage is not required for drivers to carry, but it is required for auto insurance companies to offer as a supplement to your policy.
What about medical insurance or personal injury protection (PIP)?
Health insurance and personal injury protection (PIP) on your auto insurance can be helpful in the event you are injured in an auto accident. However, there are limitations to what each will cover. In many cases you will be left with out of pocket expenses that you will have to recover through legal action. Additionally, if you are compensated for damages in a lawsuit, both health insurance and PIP are able to recoup what they paid out through the process of subrogation. Any damages awarded by the court are not only limited by insurance policy limits, but subject to liens placed by insurance companies for any accident-related medical bills they previously covered. Although there are limits on what the insurance company can recoup for PIP payouts, you will still be left with little to nothing if your medical bills are close to or in excess of the insurer’s liability limit, given the other costs of a lawsuit.
What are the limitations of UIM Coverage?
UIM policies vary in coverage and limitations (i.e., motorcycles, geographic area). Like all insurance policy supplements, make sure you familiarize yourself with all the exceptions before adding it to your policy. Additionally, you want to be clear on when you can and cannot collect on your IUM coverage.
UIM Coverage only applies to damages that exceed all insurance policy limits that apply to the vehicle of the at-fault party. So, if you are struck by a pizza delivery vehicle that is covered by both the drivers personal auto policy ($20k personal injury liability limit) and by the pizza restaurant’s liability policy ($100k personal injury limit), you need to go after the pizza restaurants insurance policy before claiming UIM. (Ochoa v. Progressive Classic Ins. Co., 296 P. 3d 906 – Wash: Court of Appeals, 1st Div. 2012 – Google Scholar)
Remember,it is the full liability policy limitof the applicable insurance policies that matters when collecting UIM claims. If you choose to settle a claim with the 3rd party insurer for less than the full policy limit, the UIM carrier can use the full policy limit as an ‘offset’. This means that if an arbiter determines you have damages worth 40k, but you have already settled with the 3rd party insurer for 15k (5k less than the full policy limit) your UIM is only obligated to cover 20k, not 25k. The good news is that settling for less doesn’t preclude the injured party from pursuing UIM coverage for damages above the at-fault party’s policy limits. (DeVany v. Farmers Ins. Co., 139 P. 3d 352 – Wash: Court of Appeals, 2nd Div. 2006 – Google Scholar)
Finally, keep in mind that a UIM policy is a written contract; if you have trouble collecting a UIM claim from your insurance company the statute of limitations is six years to take legal action against them in Washington State.