Are You Underinsured?
by Thomas A. Archer
The minimum amount of liability insurance coverage required to satisfy Pennsylvania’s Financial Responsibility law is $15,000 for bodily injury to, or death of, one (1) person in any one (1) accident and $30,000 for bodily injury to, or death of, two (2) or more persons in any one (1) accident, subject to the $15,000 per person limit. While the legislature has introduced a bill to raise these minimum limits, they currently remain the lowest such limits in the country.
What does this mean to you? If you are in an auto collision and sustain injuries resulting from another driver’s negligence, you may well be harmed by someone carrying the state minimum insurance protection. More than likely, these minimum limits will be the only available resources of the other driver, the “tortfeasor,” from which to compensate you for injuries and harms as a result of the crash. In the event you were to sustain anything more than relatively minor injuries, you will have otherwise compensable losses well in excess of the tortfeasor’s available resources to pay for them.
For that reason, Pennsylvania drivers have the option of purchasing underinsured motorist coverage (UIM) or, in the case of an accident caused by an uninsured driver, uninsured motorist coverage (UM). By having these coverages, there is now an additional resource for compensating injuries and losses in the event that a tortfeasor does not have sufficient coverage to pay for them. However, Pennsylvania drivers cannot purchase more UIM or UM than they carry in liability coverage. If you decide to carry the state minimum 15/30 coverage, you can carry no more than 15/30 on your own vehicle for UIM or UM. If, on the other hand, you carry higher liability limits, for example 100/300, you have the ability to purchase up to $100,000 (or $300,000 for multiple victims) in UIM or UM coverage.
It is sometimes the case that clients come to me with lower UIM limits than their liability limits. This is often referred to as a “sign down” because to do so, the insured driver must sign an insurance document acknowledging that he or she is knowingly electing to carry less UIM or UM than his or her liability coverage. Worse, we sometimes see insured drivers who have completely waived UIM and UM coverage, despite having to maintain coverage for injuries to others. This scenario can easily result in a coverage tragedy, where the client’s injuries and losses are extensive, but the available insurance coverage from which to compensate for such harms is insufficient.
These benefits, depending upon the amount of coverage purchased, might typically increase the annual insurance premium by a factor of about 5%-15% of the total premium versus a complete waiver or election to decline such benefits. For most, this represents a difference of anywhere from maybe $50 to around $200, or less, per year. There are a number of factors that go into these calculations, but the point is that having UIM and UM coverage as part of your insurance policy is not, in most cases, relatively expensive. This is especially true when considering what is lost in the event of a single car accident caused by someone with less than sufficient insurance coverage.
Other articles in the Automotive Insurance Decision Series:
Article I: Don’t Give Up Your Right To Full Tort Protection
Article III: Stacking Coverage Limits