Simply put, you should carry as much auto insurance as you are able to financially. Regardless of what happens in an accident and who is at fault, your car insurance provider will never pay out an amount higher than your policy mandates. Therefore, your car insurance, which includes uninsured motorist protection and liability insurance, helps you to protect both yourself and your belongings. In order to better understand how liability and uninsured motorist policies function, consider the following two fictional examples.
Liability Insurance
In this example, assume that your auto insurance's liability coverage is for $25,000/$50,000. [1] Now, imagine that you cause an accident and the other individual decides to take you to court for damages incurred. If the court finds in favor of the other person for damages totaling $75,000, your insurance company will only pay out $25,000. [2] This is because that is all that you paid them to cover. You would be left to care for the additional $50,000 on your own. As you can see, this would be a very unpleasant outcome.
Consider the same situation, but this time, imagine that you have a policy that covers $100,000/$300,000. In this case, the entire $75,000 would be paid directly from your insurance company without you having to pay anything out of pocket. This example demonstrates how purchasing higher rates of protection lowers your risk of having to pay large settlements.
Uninsured Motorist (UIM) Insurance
When you or a family member is injured as a result of another driver's error, you also benefit from carrying insurance with a higher coverage rate. This is especially true in accidents where the driver at fault causes you or a family member bodily injury but whose insurance does not cover the total expenses incurred.
For instance, imagine that your insurance policy covers $100,000/$300,000 in UM coverage. You are involved in an accident where the driver at fault's insurance policy is only for $25,000/$50,000 in liability coverage. Assuming you have to pay expensive medical bills due to serious injuries inflicted during the accident, you would then sue the other driver and could win a total of $100,000 in court. Even though you are entitled to $100,000, the other driver's insurance policy only pays you $25,000. But, since you have UIM coverage up to $100,000, your insurance company will pay you the $75,000 that the other driver's insurance could not.
These figures are calculated based off of several different rules. UIM coverage functions as underinsured motorist insurance under Virginia's state laws when your UIM coverage exceeds that of the driver at fault. If your insurance is not in excess of the other driver's, you are not entitled to this form of insurance. [3] Underinsured motorist insurance is determined by analyzing the guilty party's insurance policies against that of the injured. The above-mentioned example results in a payment of $75,000 from your own insurance company because that is the difference in coverage between the other driver's liability policy and your UIM protection. The combination of the two payments from bother their and your insurance provider will give you the total of $100,000 in damages you are entitled to.
In a case where your total UIM coverage is $25,000/$50,000, you would not receive any payment from your insurance provider. This is because your policy is for the same amount as the other driver's. Under these circumstances, you would have the option of suing the individual for the remaining funds. The reality of the matter, though, is that few people have enough assets to make such a payment. Even if they do, the legal process you have to go through in order to finally receive a payment is long and costly. Sometimes you wind up not getting paid at all. The facts show that the wise choice is to purchase an insurance policy with high limits. That way, if you or your family is injured in an accident, you will not have to worry about dealing with the problems of a driver with low policy limits. [4]
Footnotes
1. The minimum insurance limits that Virginia state laws allow you to purchase are $25,000/$50,000. Keep in mind that each state's laws vary and therefore minimum insurance limits are not the same everywhere. The statements made in this article are all based on Virginia's laws. Drivers in other states will need to look into their own state's car insurance laws.
2. Split insurance policy limits, such as $25,000/$50,000 refer to the total coverage per person and per accident. For instance, an insurance policy of $25,000/$50,000 provides a maximum payment of $25,000 per person injured with a total payment per accident not exceeding $50,000. This limit is regardless of how many people are injured and the extent of their injuries.
3. Under certain laws in the state of Virginia, specifically Va. Code - 38.2-2206, more than one insurance policy can be stacked in order to provide for underinsured motorist coverage. It would be best to get in touch with a legal professional when handling such laws, since they are quite complicated.
4. UM coverage cannot be purchased for an amount greater than the auto liability coverage in your policy under Virginia state law.
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