Why Your Car Insurance Sucks, and What You Can Do About It
Apr 03, 2018 | Ben Chasen
Most people who drive are covered by auto insurance in the event that they are involved in a crash. What most folks do not know is that car insurance is, for the most part, limited to whatever coverage is available under the at-fault driver’s insurance policy.
That is bad news for anyone who is unfortunate enough to be hit by a driver who carries the minimum coverage allowed under law, and it’s even worse news for those hit by a driver who has no insurance at all.
The likelihood of this is high—the Insurance Research Council (IRC) estimates that 1 out of every 7 drivers in the United States is currently uninsured. That can be devastating for anyone unlucky enough to be hit by one of those uninsured drivers, considering that any crash with an uninsured or underinsured driver can result in significant costs that are not covered by a basic insurance policy.
There is some good news: insurance companies in Maryland are required to offer a type of insurance coverage called “Uninsured/Underinsured Motorist” coverage (also known as UM/UIM coverage). If this type of coverage is included in your insurance policy, you have the ability to use your own insurance to cover damages that exceed the policy limits of the person who caused the crash.
But wait! There’s MORE!
Before October 1, 2017, if you purchased UM/UIM coverage in Maryland, the total amount of money available to you under your own policy was the difference between your coverage and the liability coverage of the at-fault driver. But as of October 1, 2017, drivers in Maryland have the ability to increase their coverage even more by opting into Enhanced UM/UIM Coverage.
Now, instead of being limited to the difference between the two policies, drivers who choose to “Enhance” their coverage are able to “stack” their own insurance on top of the at-fault driver’s.
Here are a few examples.
A is hit by B’s car. If A has no UM coverage and B is driving uninsured, A has $0.00 available to compensate her for any injures she sustained in the crash.
Max Total Recovery Available: $0.00
If A has UM coverage of $30,000.00 and B has an insurance policy at the Maryland mandatory minimum of $30,000.00, A will have $30,000.00 available to her from B’s policy, but there is no additional coverage available under her own policy.
Max Total Recovery Available: $30,000.0
If A has Enhanced UM coverage of $30,000.00, and B has an insurance policy at the Maryland mandatory minimum of $30,000.00, A will have $30,000.00 available to her from B’s policy and will have an additional $30,000.00 available to her under her own policy, should her medical treatment and lost wages exceed the amount covered by B’s insurance.
Max Total Recovery Available: $60,000.00
Looking at the examples above, in Example 1, A is up the creek without a paddle. In Example 2, depending on A’s injures, how much medical treatment she will need, and how much work she misses, A might be covered. But only in Example 3 did A have the full benefit of the insurance coverage she paid for, giving her the best chance to make a full recovery by allowing for an additional $30,000.00 in available coverage.
And why shouldn’t she? It’s her insurance! She should be able to use it when she needs it!
If you remember only one thing from this article, make it this: Every single driver in Maryland needs to protect themselves and their families by purchasing enhanced uninsured motorist coverage.
Introduction to Uninsured/Underinsured Motorist Coverage
For as long as there has been car insurance, there have been drivers who lack adequate coverage to provide for the people and things they hit. Since 1975, Maryland has recognized the danger of having uninsured and underinsured motorists on the road and has fought back by requiring that automobile insurers offer uninsured/underinsured motor vehicle insurance. Every Maryland resident who reads this will either have UM/UIM coverage in their policy or will have affirmatively waived it.
So how can a driver in Maryland make sure they have the best and most up-to-date insurance coverage?
Brief Overview of Insurance Coverage
First things first. It is important to understand some information about your insurance policy and the way that it will express your coverage. Every insurance policy has a coverage or Declarations Page. That section of your policy shows you how much coverage you have available. It includes items such as:
- Bodily Injury – Liability
- Property Damage – Liability
- Personal Injury Protection
- Uninsured Motorist Bodily Injury
- Uninsured Motorist Property Damage
- And other additional coverages if applicable.
For our purposes, the most important terms above are “liability” and “uninsured motorist”. Bodily injury coverage is in place to compensate for, you guessed it, injuries to the body. Property damage is also a relatively straightforward type of coverage.
Liability is the coverage you have that goes to people you hit when it is your fault. The bodily injury and property damage coverage listed next to “Uninsured Motorist” are for you when you are hit and the crash is someone else’s fault.
What is UM/UIM coverage?
Uninsured motorist (UM) coverage is designed to step into the shoes of the at-fault driver’s insurance and allow for the recovery of monetary damages from an injured driver’s own insurance policy in the event they are hit by an at-fault driver who has no insurance coverage. For example:
Abby has insurance coverage of $50,000/$100,000, which includes UM coverage (also in the amount of $50,000/$100,000). She is hit by Bob, who does not have car insurance. Abby is injured in the crash and has incurred medical bills and lost wages from her job. Because Abby purchased the UM coverage, she will be able to make a claim against her own insurance policy for as much as $50,000.00.
This is a perfect example of why Maryland requires that UM coverage be offered to drivers. Had Abby not purchased the UM coverage, her only option would be to bring a claim against Bob personally, who in all likelihood will not be able to pay out of pocket for the injuries he inflicted on Abby, and the damage that he caused. When Bob can’t pay, Abby is left holding the bag for all of the costs and burdens that Bob’s negligence caused.
Things get a little tricky when a driver that is hit by someone who is classified under the law as “underinsured.” An “underinsured” driver (aka UIM) is anyone who has less coverage than the person who they hit. Using the same example as before:
Again, Abby has $50,000/$100,000 available under her underinsured motorist coverage. This time, however, Bob has liability insurance coverage in the amount of $30,000.00/$60,000.00. After Bob’s insurance pays the $30,000.00 that is available under Bob’s policy, Abby will be able to make a claim with her own insurance company for the remaining $20,000.00, because this is the difference between her policy and Bob’s policy. In this example, Abby can recover a maximum of $50,000.00 (between both insurance policies) for her medical bills, lost wages, and any non-economic damages.
Here’s the bottom line: When you purchase car insurance, it is critical that you include coverage to protect yourself from drivers who do more damage than their insurance policy will pay for.
If you are a resident of Virginia or the District of Columbia, you also have the ability to insure yourself against uninsured or underinsured motorists.
In Virginia, uninsured motorist coverage is (technically) not required, because car insurance is (technically) not required. If you do buy car insurance in Virginia, the policy must have UM coverage equal to minimums required for liability coverage ($25,000 for one injured person, $50,000 for two or more injured people, and $20,000 for property damage).[i] If a Virginia resident decides not to buy car insurance, they may remain legally uninsured by paying a $500 fee every year to the DMV.[ii]
Uninsured motorist coverage is required in D.C., but underinsured motorist coverage is optional.[iii] UM protection must be included on all D.C. auto insurance policies, with coverage of at least $25,000 per person, up to $50,000 per crash, and $5,000 in property damage. DC Law requires that insurance companies must offer UIM, but it can be declined by the driver.[iv]
For those folks who live outside of Maryland, you still have the opportunity to purchase uninsured/underinsured motorist coverage to protect yourself in the event that you are hit by a driver with minimum insurance coverage or, worse, a driver who has no insurance coverage at all. However, D.C. and Virginia have not yet opted to offer Enhanced UM/UIM coverage like Maryland does now.
But how is UM/UIM coverage being enhanced in Maryland?
Beginning July 2018, and being offered by insurers as of October 1, 2017, car insurance companies in Maryland will be required to offer “Enhanced Uninsured/ Underinsured Motorist Coverage”. Just like in 1975 when Maryland lawmakers enacted the uninsured/underinsured motorist statute, Enhanced UM/UIM coverage is designed to increase the protection of everyday Maryland drivers from the scourge of the uninsured and the cut rate policy.
With Enhanced UM/UIM coverage, a driver in Maryland who is injured by the negligence of an underinsured driver will no longer split the difference between the coverage available to them under their own insurance policy and the coverage available from the negligent driver’s insurance.
Let’s take a look at how this is going to impact Abby:
Abby’s insurance policy now includes enhanced UM/UIM coverage in the amount of $50,000.00/$100,000.00. On July 2, 2018, she is hit by Bob, who has liability insurance coverage of $50,000/$100,000. Abby is injured in the crash, and her damages amount to $100,000. Because Abby decided to enhance her underinsured coverage, she will now have a viable claim against Bob for up to $50,000. After Bob’s insurance company pays the $50,000, Abby will also have a claim against her own insurer for as much as the full $50,000 available under her enhanced UM/UIM coverage, meaning that she will be completely covered for the $100,000.00 in damages that she has suffered.
In the three examples we have looked at, Abby has had viable negligence claims in each. But only in this last example did Abby have the coverage available to cover her if she had $100,000.00 in damages.
Had Abby sustained injuries that resulted in $100,000.00 in damages in examples 1 or 2, she would have been in a world of trouble because there wouldn’t be enough coverage available to cover all of her bills. It should be noted that if Abby’s injuries resulted in medical bills and lost wages that fell below Bob’s coverage amount, there would be no need to tap into her policy at all.
That sounds great! How do I get enhanced UM/UIM coverage?
Great question! The Maryland General Assembly has already done the heavy lifting of passing HB5, which amended Maryland law to require all automobile insurance companies offer enhanced underinsured motorist coverage to their customers.[v] This means that the next time you are in the market to renew or purchase a car insurance policy, whatever insurer you choose will be required to offer you enhanced uninsured/underinsured motorist coverage.
Now, the important (and sometimes difficult) part is making sure that you do not affirmatively waive your coverage here. All of the insurance companies say that they can save you X amount of money in X time if you switch. DO NOT BE FOOLED. The way that these insurance companies save you money is by tricking you into waiving your coverage. You may save some money in premiums, but that cost will catch up to you in the event that you are ever hit by someone who carries less insurance than you do or no insurance coverage at all.
Why Does Any of This Matter?
The simple truth is this: in every case, by the time you realize that the cost of your injuries greatly exceeds the amount of insurance coverage available for you under the at-fault driver’s auto insurance policy, it is far too late to do anything about it. Only by choosing the best type of insurance policy to begin with can you be sure that you will have access to the amount of coverage you need if you are ever seriously injured in a crash.
That is why the next time you are looking at renewing or changing your auto insurance, make sure you are covered with enhanced UM/UIM coverage.
If you or someone you care about have been injured in a motor vehicle crash and have questions about your rights when it comes to your insurance coverage, it’s important to talk to an attorney who understands the complexities of UM, UIM, enhanced UM/UIM and how insurance companies play the game to protect their pocketbooks. Don’t let the insurance companies deprive you of the coverage you’re not only entitled to, but that you’ve already paid for as a policyholder and customer.
[i] Virginia Code § 38.2-2206(A)
[ii] Virginia Code § 46.2-706.
[iv] DC Code§ 31-2406(c)(1)
[v] See MD Ins. Art. §19-509.1(c)(1).