In most states there are laws that provide underinsured motorist (“UIM”) insurance. By having UIM a person covered by this insurance, in addition to their regular auto insurance policy, can recover damages (if involved in an accident) when the driver responsible for any injuries that occur doesn’t have enough insurance coverage.
There are very significant differences in the UIM policies that are written by various insurance companies and laws vary from state to state. In some states, UIM coverage is optional, or coverage applies unless the insured specifically rejects it. In other states, companies must offer it to their customers and car owners must carry it.
The state UIM laws also differ on when UIM coverage is used. In some states, the insured’s coverage is triggered based upon terms in the insured’s policy, while in other states, it’s based upon the policy of the driver who caused the injury.
It is critical to understand the differences in UIM state laws and the differences in policy types. An experienced insurance agent can best explain these terms and requirements.
Getting or Having UIM Coverage
If driving in Maryland, a person must show that they can pay for accidents they have caused. Most Maryland drivers do this by buying auto liability insurance. In states that require UIM, insurers are required to provide coverage unless it is specifically rejected by the insured. Most laws set a minimum and maximum amount of coverage required in the policy.
Motorists may also purchase extra UIM insurance in addition to the amount already covered in the basic policy, but only up to a certain, specified amount.
While some states don’t require UIM, making it an option, most state laws say that it must be made available to drivers. These laws also state that insurance companies might have to provide:
A written notice of the availability of UIM insurance
An offer for coverage when a person applies for insurance, and
Insurers have to offer UIM when it offers uninsured motorist insurance to its customers
Exclusions to the Coverage
UIM policies often contain exclusions that bar:
Coverage of a vehicle if the uninsured motorist insurance can provide coverage for the accident (check with the state because states may vary on their enforcement of this exclusion)
Coverage if a person is injured by a vehicle they own, owned by their spouse or a family member not listed in their insurance policy
How Much Can Be Recovered?
Although policy limits usually define how much in UIM benefits an insured can be paid, there are several things that can increase or reduce those amounts. Most UIM policies allow the insurer to reduce UIM benefits by the amount paid to the insured by the wrongdoer or the wrongdoer’s insurers. Some states, however, do not permit insurers to make this reduction.
By having insurance coverage for more than one vehicle with the same company, a person can use the UIM coverage from each policy to stack coverage to recover damages from one incident. Stacking can also come into play if the UIM law in a particular state does not allow for recovering UIM benefits unless UIM coverage is more than the limits of the insurance policy of the person at fault. But not all states allow stacking, so check state laws concerning these matters.
Claiming UIM Benefits
UIM coverage doesn’t automatically begin once an accident occurs so check the policy and the state’s UIM laws to find out how to notify the insurance company when wishing to use UIM coverage.
Some states may require all of the wrongdoer’s insurance coverage to be “used up” before the victim’s UIM insurance can kick in. Other laws require suing the person at fault in the accident and obtaining a court order that is greater than the wrongdoer’s policy limits before victim claims benefits from their own policy.
This varies from state to state as well. A Maryland car insurance policy meets the financial responsibility requirements of most other U.S. states and Canada.