A new study released by the Insurance Research Council (IRC) shows a nationwide rise in underinsured motorists. Over 16% of U.S. drivers had insufficient liability insurance coverage in 2023 – an increase of 2%. With approximately 235 million licensed drivers in the country, this means there are 35 million drivers who, if they hit you, may not have enough insurance to cover your losses.
Closer to home, there are 6.2 million licensed drivers in Virginia, with an estimated 900,000 drivers with inadequate liability coverage who could damage your car or cause you injury. Your own insurance would need to cover part of the costs. According to Finance Buzz, 10% of Virginia drivers carry no insurance at all, which means there are another 620,000 drivers on the road who will leave you footing the entire bill even if they cause the accident.
The figures are expected to increase in 2024 as the cost of auto insurance has increased by 15% nationwide and 7% in Virginia. Under Virginia law, registered drivers do not need to carry liability insurance in order to register their vehicle. They can pay a $500 uninsured motor vehicle fee. So, even though their car may be legally on the road, they have no insurance to cover the bodily injury and property damage that they cause in a crash. For many drivers, it is less expensive to pay this $500 fee than to carry liability insurance.
These are sobering statistics, especially when you realize there are over 100,000 car accidents in Virginia each year.
What is the Difference Between Liability and UM/UIM Coverage
There are two types of coverage that typically come with an auto insurance policy:
Liability Coverage provides coverage to others who are injured when you are at fault for causing an accident.
UM/UIM Coverage (Uninsured Motorist/Under-Insured Motorist) provides coverage if you are injured due to another person's fault.
Here’s an example of how UM/UIM coverage works:
You are driving down a highway at the posted speed limit. A car overtakes you from the rear and suddenly slams into your car, causing you to spin out and crash into the ditch. Not surprisingly, you suffer severe injuries that require surgery and an extended hospital stay. Your medical bills total over $100,000. As you recover, you miss months of work, making you lose $40,000 in income. You suffer permanent scars and a leg injury that will give you long-lasting issues. The driver who caused the crash only has an insurance policy with $30,000 coverage for bodily injury per person.
If you have no UM/UIM coverage or just the minimum limits policy, you would only receive $30,000 from the negligent driver's insurance company. You would not be able to recover for your remaining medical bills, lost income, pain and suffering, or permanent scars or injuries.
On the other hand, if you had $500,000 in UM/UIM coverage in your automobile insurance policy, you would first receive the $30,000 from the negligent driver's insurance company. Then, you would be able to make a claim up to an additional $500,000 from your own insurance company for your medical bills, lost income, pain and suffering, and permanent injury (A Virginia law effective July 1, 2023, now allows you to “stack” your coverages. Otherwise, your limit would have been $470,000).
Virginia Has Changed the Auto Insurance Code
Under a new law that went into effect on July 1, 2023 (Code of Virginia 38.2-2206), UM/UIM coverage is automatically included in your policy unless you opt out of it. Many auto insurance providers would prefer you drop the coverage as it would reduce the number of claims they get, and they may offer a lower premium as an incentive.
However, as the example above shows, the amount the premium would drop is not worth it.
Mutual Assurance’s UM/UIM Coverage
Let’s say in the scenario above that a passenger in your car was injured and has decided to sue for pain and suffering. Your $500,000 UM/UIM policy may not be enough to cover his claim.
We live in a time of “social inflation,” where juries tend to give plaintiffs higher awards. After your own expenses, that $500,000 is already depleted, so where would the passenger’s expenses come from?
Mutual Assurance policyholders who have an umbrella policy with us can purchase additional UM/UIM Coverage. Members must have an underlying UM/UIM limit of $500,000 with their auto policy and can get an additional limit of $1,000,000 for greater peace of mind. The annual cost for this additional coverage is below $200, with an added nominal charge for additional vehicles.
With additional coverage through Mutual’s UM/UIM coverage, you can rest easier knowing you are in a better position should an accident occur.
For more information on our UM/UIM coverage, contact your underwriter.
Sources: Statista, Finance Buzz, CMLawVA, Triple iii Daily, Marks & Harrison, InsProAgency, National Law Review, Virginia.gov