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Taking Matters into Your Own Hands: Underinsured Motorist Coverage in North Carolina

By Lindsey Weaver Alday

One of the biggest frustrations of practicing personal injury law is that the law in North Carolina is not favorable to those injured in accidents. There are three major ways in which the law is unfavorable: 1. Contributory Negligence (I will address this law in future blogs), 2. Low minimum limits, 3. Bill v/s Paid, also known as Rule of Evidence 414. (I will address this law in future blogs).

The issue I will discuss in this blog is issue number two:  low minimum limits. The reason that the law is unfavorable to injured people is that the majority of us have not been injured by the negligence of another. This is a good thing in general. However, if you ever find yourself in the minority (those injured), you may very well be frustrated at the inequity of North Carolina law. Unfortunately, unless you read this blog or are injured and learn the hard way, the laws will not change because majority rule.

This “low minimum limits” blog is the most important one out of the three because this issue is one that you can take into your own hands. The other two are subject to change by legislation alone. You can take this issue into your own hands by purchasing UNDERINSURED MOTORIST COVERAGE (UIM).

Minimum limits in North Carolina

The state of North Carolina requires motor vehicle insurance on each vehicle you drive. It also sets minimum limits on the amount of coverage that is paid if an accident does occur.

The minimum limits required for liability motor vehicle coverage are $30,000.00 per person, and $60,000.00 per accident. I am going to use death as the “injury” that occurs in order to most clearly demonstrate this insurance terminology. The per person limit means that if only one person dies in an accident, the most they will receive in compensation is $30,000.00.

The per accident limit of $60,000.00 means that if six people die in an accident, each person will only get $10,000.00 (or some other proportional payout totaling $60,000.00). Thus, the insurance company limits its exposure two ways:  per person and per accident. If you would like to see what coverage you have, check your declarations page. If you have minimum limits, you will see limits expressed in this manner 30/60, or $30,000/$60,000.

Why you need more than the minimum

If you have ever spent much time admitted to a hospital in eastern North Carolina, you know that $30,000.00 does not go a long way. This is why I encourage you to increase your insurance coverage to include UNDERINSURED MOTORIST COVERAGE (UIM).  UIM coverage compensates you when you are injured in an accident and your claim is worth MORE than the pay out from the at-fault party’s insurance company. If you are injured by someone with minimum limits and your claim is worth more than $30,000.00, you will be wishing that you had covered yourself with underinsured motorist coverage.

When does UIM apply?

Underinsured motorist coverage comes into play when your policy limits are MORE than the at-fault driver’s coverage. So, it is paid when the negligent driver has LESS insurance than you. If they have more coverage than you, it will not be used. However, my overall message is this: you have to protect yourself because no one else is going to. You cannot rely on others to have better than minimum limits coverage, because it is not usually the case.

How does UIM work?

The next step up in motor vehicle coverage provides $50,000 in per person coverage and $100,000 in per accident coverage. By way of example: if someone dies in an accident caused by someone with minimum limits coverage, they will receive $30,000.00 in liability pay out from the at fault driver’s insurance company. IF and ONLY IF the deceased person had underinsured motorist coverage will they receive any additional compensation. In the 50/100 example, the deceased person’s own policy would permit them to receive an additional $20,000.00 pay out. This would not “count against” the injured party because they were not at fault in the accident. I am often asked this question: If my own insurance company is paying me money, won’t my rates go up as a result? NO. They will not. This type of insurance is called “no-fault” insurance for that very reason.

How much UIM do I need?

You can get as much underinsured motorist coverage as you desire and can afford. It is surprisingly affordable to get this additional insurance when you consider how much better protected you and your family will be. My favorite coverage is $300,000 per person/$300,000 per accident. This way, if one person is severely injured, they will not be limited by the per person limit because it matches the per accident limit. There are only a few insurance companies that offer this combination of coverage.

UIM provides more coverage in more circumstances

I want to make this clear: if you have minimum limits liability coverage, it will only help you in two situations. 1. If you cause the accident. 2. If the person who caused the accident has NO insurance. The second type of coverage is called uninsured coverage because the at-fault driver is not insured.

If you have liability and underinsured motorist coverage, it will help you in at least six situations. 1. If you cause the accident. 2. If the person who caused the accident has NO insurance. 3. If the person who caused the accident has LESS insurance than you and you were their passenger. 4. If the person who caused the accident has LESS insurance than you and you were in another vehicle. 5. If someone is injured in your vehicle when you are not present, and their driver was at-fault. 6. If someone is injured in your vehicle when you are not present, and their driver was not the at-fault driver.

The take home message is that if you have underinsured motorist coverage, you can rest assured that no matter where you are when the accident occurs, YOU will be covered up to YOUR limits. This is also true for underage family members who live with the person or people listed on the policy. UIM coverage “follows” the people named in the policy and the family members that live with them.

You can also rest assured that if anyone is injured while riding in the vehicle listed in your policy, they will be covered up to YOUR limits. UIM coverage also “follows” the vehicle or vehicles listed in the policy.

NONE of this occurs with a minimum limits (30/60) policy.

 The number of combinations of family members, passengers, or people that I could use as examples is practically endless. But I will use one poignant example that I hope will strongly encourage you to call your agent and add this coverage if you do not have it.

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