Operating a vehicle on Indiana’s public highways is a privilege; and with it comes great responsibility. Most driving adults recognize the serious injury or death that can arise when someone is negligent. This is why everyone is legally required to prove “financial responsibility” in order to register a vehicle for public operation. There are a couple of ways to do this, but for most people, it means carrying liability insurance. Liability insurance provides monetary coverage for damages one causes other people as the result of negligent driving. (In Indiana, the minimum liability limit is $25,000 per person – which is the same amount that was required when I got my driver’s license nearly 4 decades ago. That amount is way too low for today’s medical costs, but that’s an article for another time).
A major problem is that people often drop their auto liability insurance or fail to renew it. Those people are referred to as “uninsured motorists.” Another problem is that the liability limit people carry might not be enough to cover the medical bills, lost wages, and other damages they may cause in a car crash. These people are referred to as “underinsured motorists.” Both problems are all too common. For these situations, Indiana law requires all insurance companies to offer their customers Uninsured and Underinsured Motorist (UM/UIM) coverage. Unlike liability insurance, which is coverage you get for someone else, UM/UIM is coverage to protect yourself.
The purpose of this article is to educate people on the basics of how UM/UIM works and to encourage you to consider increasing your limits. The first rule to understand is that you cannot cover yourself for more than you cover others. That is, the maximum UM/UIM coverage you can get is equal to the amount of liability coverage you carry. So, if you have liability limits of 100/300 ($100,000 per person/$300,000 per accident), you can only carry UM/UIM of $100,000.
The second thing to understand pertains to UIM and that the limit you pay for is not “additional” insurance on top of the other driver’s liability limit. Rather, your UIM limit represents the maximum you can recover in total from a single crash. Coverages from other sources act as an offset from that limit. For instance, if you have $100,000 in UM/UIM coverage and someone negligently injuries you in a crash, the amount of UM/UIM coverage available depends upon the other driver’s liability limits. If they have no insurance (they are “uninsured”), you have up to $100,000 in coverage. If they have $50,000 per-person liability limits, then you would have up to an additional $50,000 of UIM coverage – totaling $100,000. You don’t add their $50,000 limit to your $100,000 and get $150,000 in coverage. Similarly, if your own policy covers medical expenses, many policies also reduce your limit by the amount paid. For instance, if in the same example your auto insurance covered $5,000 of your medical bills, you may only have an additional $45,000 of UIM coverage. So, the most you can recover is the amount of your stated limit. Most people don’t realize this.
A third thing to know is that you might not have to be in your vehicle when your injury occurs. If you have UM/UIM insurance and are injured by an uninsured or underinsured motor vehicle while walking the dog, then your UM/UIM coverage may apply, depending on the language of your policy. The analysis may be complex and require consultation with legal counsel.
Despite the complexities that may arise in this area of insurance and law, one concept is very simple. That is, most people drive without sufficient coverage. It is important to recognize that the lost wages you may sustain and the medical bills you may incur are several times what they were decades ago when Indiana’s minimum limits were last adjusted. As an attorney who practices in this area, I regularly see people face losses where the available insurance is insufficient to cover everything. Accordingly, everyone should visit their agent and reconsider whether their current coverages are adequate.