One thing I come across more often than I used to is reduced limits of coverage on personal and business car insurance policies. Specifically, the reduction in coverage is on Uninsured and Under-Insured Motorists limits. Is this a good way to reduce insurance costs? Or is it a trap?
What is Uninsured and Under-Insured Motorists Coverage?
First, it’s a mouthful, so from here on, we’ll use UM/UIM as an abbreviation.
More importantly, UM/UIM is a type of insurance that protects someone injured in a car accident when the other driver doesn’t have any insurance – or if they don’t have enough coverage.
In Pennsylvania, 7.6% of drivers don’t have car insurance.* This stat doesn’t count drivers at state minimum limits, which only cover up to $15,000 per person.
Here’s an example: if you’re in a car accident where the other driver is at fault and doesn’t have insurance, who pays for the costs of your injury? If you have Uninsured Motorists coverage, your policy will pay for the costs you incur in being injured in the accident. The amount that’s paid depends on the actual damages you suffer as well as what limit of coverage you have.
Sounds important right? Add in the fact that the coverage applies for other members of your family and other people in your vehicle, and it becomes that much more important.
So why would someone reduce the amount of coverage they have for this?
Isn’t that what health insurance is for?
That’s the common argument for reducing limits. So would your health insurance cover you for an injury you had in a car accident? In most cases, yes, health insurance would very likely cover your medical expenses.
Add in the fact that:
- UM/UIM coverage can be expensive
- Many insurance buyers (and agents) are focused on reducing price
And the result is reducing this coverage to save premium.
So if Health Insurance covers the medical expenses and you can save money on your insurance premiums, why wouldn’t you reduce this coverage?
Why is UM/UIM important?
Health Insurance Doesn’t Cover Everything
Let’s ignore deductibles, coinsurance and copays for now. What does health insurance typically cover?
- Doctors bills
- Ambulance rides
- X-rays and MRIs
- Lab work
- Physical therapy
Now, let’s think about what it doesn’t cover:
- Lost income from not being able to work
- Chronic pain
- Mental anguish
- Home health care
- A life-altering disability
- Property damage
Here’s what I recommend to all of my clients:
- Your UM/UIM coverage should match the Bodily Injury limits on your policy.
- You should always “Stack” UM/UIM coverage.
- If you have an Umbrella policy (which I also recommend), add Excess UM/UIM coverage, if available. If it’s unavailable, look at options from other carriers.
There’s a good reason why reducing or removing UM/UIM coverage saves premium costs – it’s a coverage that’s triggered frequently and can be a costly payout for the insurance company.
Furthermore, even good drivers have no control over whether or not someone else causes a car accident and whether or not that driver has the right insurance coverage.
Ready for a Conversation?
Do you have the peace of mind in knowing that your family’s future is protected if an accident happens? Do you understand how your insurance coverage works in providing that protection?
If you’re ready to take a different approach with your insurance coverage, you can find time with us here: