Underinsured Motorist Coverage: Everything You Need To Know
Important facts about Underinsured Motorist Coverage (UIM) and why this valuable insurance protects you in a crash with an underinsured driver
Underinsured motorist coverage protects you when you are injured in a car accident caused by another driver who is “underinsured” – meaning that their insurance policy limits are inadequate in relation to the injuries that this driver has caused. It is essential for all drivers in Michigan.
Because car insurance is expensive in Michigan, the majority of drivers on our roads buy insurance with minimum bodily injury policy limits. This is the least amount of liability coverage that the law allows.
This is bad for everyone. If these underinsured drivers cause a car accident that injures or kills someone else, then they won’t have the necessary insurance coverage to properly and fully compensate their victims for their pain and suffering and “excess” medical expenses.
Driving underinsured is also dangerous for the negligent driver who causes a serious car accident because it leaves this driver exposed to severe financial consequences. A judgment or trial verdict can lead to wages being garnished and a lien can be placed on assets, such as on your home.
In a world where the majority of cars on our roads are underinsured and where most drivers opt for the least expensive bodily injury insurance coverage, underinsured motorist coverage – also known as UIM coverage – is often the only chance for car accident injury victims to recover the noneconomic and economic damages that they need and that they are entitled to after being injured by an underinsured driver.
Our auto accident attorneys have long recommended that all drivers should purchase UIM coverage (as well as uninsured motorist coverage). Any auto insurance policy sold in Michigan today without UIM coverage (as well as UM coverage) does not protect you and your family. We recommend that every person obtain this extremely important and inexpensive coverage.
Insurance agents who don’t recommend underinsured motorist coverage are remiss. Insurance agents should be educating people on just how important it is and also recommending it to their customers.
The only way to properly protect yourself and your family against a crash with an underinsured driver is to purchase UIM coverage.
To learn more, please order your free copy of our book, “How much car insurance do I need?”
What is underinsured motorist coverage?
Underinsured motorist coverage (UIM) provides a valuable source of legal recovery for pain and suffering compensation and “excess” No-Fault PIP medical benefits and other economic loss for people injured in a car accident caused by a driver with inadequate insurance coverage, i.e., an “underinsured” driver.
Specifically, UIM coverage helps pay money damages to car accident victims when the driver who caused the accident had inadequate liability insurance coverage.
What makes someone an “underinsured” driver?
An “underinsured” driver is:
- A driver who was at-fault in causing a car accident that injured or killed someone else; and,
- A driver whose liability insurance coverage is inadequate to cover his or her victim’s (or victims’) pain and suffering compensation, excess medical expenses and other economic loss damages.
It is frequently the case that an underinsured driver is a driver who purchased the minimum liability insurance coverage required by the No-Fault law. Currently, the mandatory minimum “liability coverage” limits are “$20,000.00 because of bodily injury to or death of 1 person in any 1 accident” and “$40,000.00 because of bodily injury to or death of 2 or more persons in any 1 accident,” which is commonly referred to as 20/40.
On or after July 2, 2020, the default liability coverage minimums increase to $250,000/$500,000 – although drivers will have the option of choosing lower limits of $50,000/$100,000. (MCL 500.3009(1)(a) and (5)).
Make no mistake, whether the minimum liability coverage limits are $20,000 or $50,000, they remain dangerously inadequate.
How does underinsured motorist coverage work?
Underinsured motorist coverage works like this: If a car accident victim has UIM insurance, then his or her own auto insurance company will provide the compensation and money damages that could have been recoverable if the underinsured driver had had adequate liability insurance coverage.
To put it more simply, your own auto insurance company “steps into the shoes” of the underinsured, negligent driver and pays for all personal injury damages that the underinsured driver would have been responsible for by causing a car accident.
Some insurance companies require that an underinsured motorist lawsuit be filed that also names the underinsured negligent driver as a party in the lawsuit.
What does UIM coverage cover?
UIM coverage covers the pain and suffering compensation that could have been recoverable from the at-fault, underinsured driver’s auto insurance company if he or she had had adequate liability insurance coverage.
Additionally, once the new No-Fault PIP medical benefits coverage levels become available in auto insurance policies issued or renewed after July 1, 2020, UIM coverage will cover a car accident victim’s claim for “excess” No-Fault PIP medical benefits that would have otherwise been covered by the at-fault, underinsured driver’s auto insurance company if he or she had had adequate liability insurance coverage.
Tips for filing a UIM coverage claim
- In order to collect benefits under a UIM policy, an injured person must show: (1) the other driver was “underinsured”; (2) the underinsured driver was at-fault in causing the car accident that resulted in the person’s injuries; (3) the injured person has recovered damages equal to the full liability policy limits from the at-fault driver’s auto insurance company, or that the insurance company for the negligent driver has offered the full policy limits to pay for the harms caused by their insured; and (4) the insurance policy of the at-fault driver’s car insurance company is inadequate and does not pay all of the injured person’s personal injury damages.
- Identify and comply with the notice requirements in your UIM insurance policy. Many auto insurance companies require injured persons to provide notification of a car accident within a certain period of time (frequently within 30 to 90 days of the date of the car accident). If notice is not provided – or if notice is provided late – auto insurance companies can deny coverage for a UIM claim depending on the policy language. UIM coverage is contractual, which means the policy language will control. Out of state lawyers beware – Michigan has no doctrine of reasonable expectations and the contract language regarding notice will be strictly construed.
- Identify and comply with your auto insurance company’s deadline for filing a claim for UIM coverage benefits. This is very important for two reasons: (1) Because UIM insurance is not mandatory under the No-Fault law, your UIM auto insurance company has the authority to set whatever deadline it wants for the filing of UIM claims; and (2) Your UIM auto insurance company may try to set a shorter filing deadline than the three-year statute of limitations for most personal injuries (MCL 600.5805(2)), although insurance regulations that impose certain requirements on insurers when they make changes to the terms of their policies have made this practice less common. We strongly recommend you contact and review your UIM policy contract language with an experienced Michigan auto accident attorney who can help you to comply with the contract language and so you do not unintentionally void your own UIM protection.
- Watch out for “set-off” provisions in your UIM coverage policy. Many auto insurance companies have included provisions in their UIM policies allowing them to “set-off” or deduct from the UIM benefits they owe any payments to the insured for No-Fault PIP benefits coverage of accident-related medical expenses and lost wages.
- Read your UIM policy carefully to find out if non-resident family members are covered and under what circumstances any such coverage may exist.
Warning about settlements and your UIM coverage claim
Many auto insurance companies include language in their UIM policies that require their insureds to seek and obtain the insurance company’s consent and/or written permission before settling a claim with the at-fault, underinsured driver’s auto insurance company.
As such, if the auto insurance company for the at-fault driver who injured you offers to settle your liability claim for personal injury, DO NOT settle unless and until you have first received written permission from your UIM insurer to settle the underlying bodily injury case for the at-fault driver’s full policy limit.
This is a unique area of Michigan law, and many lawyers make this mistake and commit malpractice by not getting permission in writing before accepting the proffered bodily injury/liability insurance policy limits from the negligent driver’s insurance company, causing the underinsured motorist coverage to be contractually voided.
It is very important that you and your attorney determine whether your UIM policy has such a “consent” requirement and, if it does, that you comply with the requirement.
Michigan courts have ruled that failure to obtain your UIM insurer’s consent (when it’s required) before settling with the at-fault driver will very likely void your UIM coverage and disqualify you from recovering anything under your UIM policy.
Do I need underinsured motorist coverage?
Yes, you need underinsured motorist coverage in Michigan because without it, you and your family are at grave risk of being unable to recover the pain and suffering compensation and “excess” No-Fault PIP medical benefits you may be entitled to.
Without this coverage you are leaving your future financial recovery and the money to pay for your future medical care in the hands of fate and luck – your recovery will depend on whatever the insurance policy limits are of the person who injures you. Remember that most drivers buy auto insurance policies with the lowest liability coverage limits allowable under the law because those car insurance policies are also the cheapest.
But those cheap PLPD policies come at a steep price. Drivers with the legal minimum liability limits won’t have enough insurance coverage to pay for pain and suffering compensation and/or “excess” medical expenses if they cause a car accident that results in injury or death.
UIM coverage, however, will protect you by paying the difference between whatever the liability insurance policy limits are of the underinsured driver who caused your car accident and injured you and the amount of UIM coverage you’ve purchased. This protects you from a disastrous outcome if you are seriously hurt by an underinsured driver.
This is why our auto accident attorneys agree that UIM coverage (within the bodily injury/liability limits we recommend) is a must for any car insurance policy.
How much underinsured motorist coverage do I need?
The recommended underinsured motorist coverage insurance that drivers need to purchase is with limits of at least $500,000 per person and $1,000,000 per accident. Fortunately, this coverage is very inexpensive.
Is underinsured motorist coverage necessary?
Yes. For all of the reasons I’ve discussed above. If your insurance agent is not offering you this important contractual coverage, you should be finding a new insurance agent.
Is underinsured motorist coverage worth it?
Yes. Underinsured motorist coverage is worth it because it is so vital to protecting you and your family if you’re seriously injured in a car accident caused by an underinsured driver. It is also very inexpensive.
For the price of a movie ticket and a box of popcorn, a driver can easily purchase UIM coverage for the coverage limits that our attorneys are recommending ($500,000/$1 million).
Do I need to have underinsured motorist coverage if I have health insurance?
Yes. First, underinsured motorist coverage is not meant to pay for medical bills or medical treatment. It is relied upon to compensate for an injured person’s pain and suffering and injuries and any excess economic loss and medical bills not covered by health insurance.
Second, even if an injured person does have health insurance, if his or her injuries require medical care and treatment that is not covered by health insurance, or that exceeds the applicable care available under the health insurance or that exceeds the applicable No-Fault PIP medical benefits coverage level in Michigan after July 1, 2020, then UIM coverage will allow the injured person to pursue a claim for “excess” No-Fault PIP medical benefits.
Do I need underinsured motorist coverage if I have collision and comprehensive?
Yes. Whereas collision and comprehensive coverage will cover physical damage to your car or truck, only underinsured motorist coverage will cover pain and suffering compensation and “excess” Michigan No-Fault medical benefits as a result of a car accident caused by an underinsured driver.
Is underinsured motorist coverage required?
No. Underinsured motorist coverage is optional insurance coverage, meaning it is not required to be sold in Michigan. It is added contractual coverage that must be purchased and then added to a car insurance policy. Our attorneys strongly recommend that all Michigan drivers purchase UIM insurance to properly protect themselves and their families.
Unfortunately, too many auto insurance companies and insurance agents fail to properly inform drivers just how important this insurance coverage is.
Car Accident Lawyers of Michigan Auto Law Can Help You
For more than 50 years and three generations, the car accident lawyers of Michigan Auto Law have specialized in helping people who have been injured in serious car, truck and motorcycle accidents and in representing victims in automobile insurance litigation involving claims for UIM benefits.
If you were injured in an auto accident with an underinsured driver and need help obtaining your UIM benefits, please call us at (800) 777-0028 for a free consultation with one of our experienced auto accident attorneys.