Should You Buy More Uninsured Motorist Coverage Than is Required?

by Patrick Gleeson, Ph. D., Registered Investment Adv
Your auto insurance doesn't reimburse you if an uninsured driver causes the damage unless you have uninsured motorist property damage coverage.

Estimates of how many U.S. drivers are uninsured vary from state to state, from a low of 4 percent in Maine to a high of 25 percent in California, according to Statistic Brain, a website that compiles statistics from various sources. Uninsured drivers also have more than their share of accidents. Getting uninsured motorist coverage to protect yourself against them is essential. There are a couple of ways of figuring out how much uninsured or under-insured motorist coverage you need.

UM/UIM Insurance Coverage

Before you can know how much uninsured/under-insured motorist coverage to carry, you need to know what the coverage gets you. According to the website DMV.org, the coverage includes your medical expenses, lost wages and pain and suffering related to injuries you suffer in the accident. It also covers members of your immediate family. It only covers vehicle repairs if you also have another coverage: uninsured motorist property damage insurance.

Rules of Thumb

In an article on his website, Barry Goldberg, a California personal injury lawyer, recommends that his clients carry as much UM/UIM coverage as they carry in third-party liability insurance. In many states, this is a minimum of $30,000 per person, up to a total of $60,000 per accident. These minimums may be too low, however, according to attorney Reuben Donig. Donig says on his website that a prudent minimum in liability coverage is $100,000 per person, up to a total of $300,000 per accident. If so, then recommended UM/UIM coverage would be in the same amount.

Relationship of Coverage to Assets

So far as automobile liability insurance goes, another rule of thumb is that in addition to recommended minimums you should have enough additional coverage to equal your assets. This seems like a good idea, because if you're involved in a bad accident involving serious bodily injury or death, you could be sued for a lot -- potentially, a million dollars or more. If you have high net worth, you could lose that much of your assets. But this same rule of thumb seems to argue against the need for a lot of liability insurance when you're young, starting out and don't have many assets. However, there's a catch.

Here's the Catch

Most insurance companies will only give you as much UM/UIM coverage as you have in liability coverage. In other words, to get the UM/UIM coverage you need, you may have to buy more liability coverage than you want. It still seems like a good idea to do it, and here's why: when you're young you don't a lot of savings to fall back on. In fact, according to The Huffington Post, the average American has less than $500 in savings -- and that includes older Americans who generally have more. What this means is that if you're hit by an uninsured driver, you need to have coverage not only for your injuries, but for lost wages. Automobile injuries can incapacitate you for months and reduce your earning ability for years. That's why, when you're young and starting out, you need, if anything, more UM/UIM coverage than an older and wealthier driver who has financial resources to carry her through her recovery period.

About the Author

Patrick Gleeson received a doctorate in 18th century English literature at the University of Washington. He served as a professor of English at the University of Victoria and was head of freshman English at San Francisco State University. Gleeson is the director of technical publications for McClarie Group and manages an investment fund. He is a Registered Investment Advisor.

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