You may be asking, “How do I determine if I have adequate auto insurance coverage?” To help you understand the best type of car insurance coverage for peace-of-mind protection, let me tell you about an accident. The story concerns a driver who is in an accident with an uninsured driver. We will use the pseudonyms Sally, the driver who was rear-ended and not at fault, as well as Jimmy, the driver who rear-ended Sally and was found at fault by a report from the police at the scene.
Sally sustained severe injuries when she was struck from behind. Because was a state of no fault, Sally was able to use her auto insurance policy to cover medical expenses. This means that nearly all insurance policies must cover passengers and drivers of insured vehicles with medical payments up to $50,000. This coverage is often referred to personal injuries protection, or PIP. If they wish, policyholders can buy additional PIP coverage beyond the $50K standard. Sally’s policy provided her with $50,000 in personal injury coverage.
After exhausting her PIP coverage, Sally met with a lawyer to discuss suing Jimmy for suffering and making a claim under Jimmy’s policy. But Jimmy was uninsured at that time. Sally still decided to sue Jimmy and pursue his personal assets. After a long court battle, Sally’s suffering was assessed at $200,000 by a court and a judgment was issued against Jimmy. Jimmy was without assets, so Sally was shocked when he returned to work. Sally’s medical bills surpassed the $50,000 she received from her PIP coverage. Sally didn’t have any health insurance and wasn’t able to pay for her medical bills. How was Sally to pay all her bills? Sally was not going to wait for Jimmy to find a job.
Well, insurance policies typically have another standard coverage called Supplemental Uninsured/Underinsured Motorists Liability (aka SUM coverage). At the time of the accident, Sally’s policy only had the minimum required SUM coverage, which is $25,000 per person and $50,000 per accident in her state. Sally received $25,000 for her pain and suffering, which mainly covered her medical costs. However, she still had to pay for all her medical expenses. Would she have liked more coverage? What is SUM coverage?
Supplemental Uninsured/Underinsured Motorists Liability (SUM) coverage is auto insurance coverage that is mandatory on all car insurance policies in many states. This coverage protects people who are hit by a car driven by someone with little or no insurance or who are involved in a hit-and-run accident. Jimmy did not have any auto insurance, as Sally and Jimmy were without it. Sally’s SUM coverage is to cover her pain and suffering if Jimmy’s insurance is not available.
Ironically, Sally was subject to high bodily injury limits of $250k/$500k. However, they did not apply in this case. For just a few dollars more she could have had increased her uninsured/underinsured motorist (SUM) coverage to match her bodily injury liability limits and she would have been able to pay for the cost of all her medical bills with the help of her own insurance carrier!