You Got Options: Underinsured Motorist Coverage in North Carolina

Read this article along with the last one on Uninsured Motorist Coverage.  They’re similar types of coverage and are often offered in conjunction with one another. 

If you’ve watched the news or gone to the doctor in the last six years or so, you know that healthcare is more expensive than it’s ever been.  Costs have gone up to the point where the federal government has been forced to step in, and even those efforts have done little to remedy the issue.

So... what does this have to do with my car accident?

Thirty thousand dollars (the minimum liability limits in North Carolina) may seem like a lot of money.  It might seem unlikely that your medical bills would exceed that amount if you’ve been injured in a car crash.  Well, guess what?  We see it happen all the time.  For example, let’s say Preoccupied Polly is texting while driving and sideswipes your car, sending you careening into the woods.  You break your collarbone and your jaw, and tear your left MCL while you’re at it.  After a couple surgeries and four months with a physical therapist, your medical bills come out to $45,000.

The problem is that Polly’s liability policy only carries the minimum limits of $30,000.  Even if you max out the limits under her policy, that leaves you with $15,000 in outstanding bills; and that’s before you factor in lost wages, out-of-pocket costs, and other damages such as pain and suffering.  If Polly’s like the average American, you won’t be able to recover against her individual assets. 

So where’s that extra $15,000 supposed to come from?

Now imagine that your own liability coverage is in the amount of $50,000 per person and $100,000 per accident.  In North Carolina, provided that your own liability coverage exceeds the $30,000 minimum limit, your auto policy must provide you with underinsured coverage up to the amount of your liability coverage.  Provided that your coverage exceeds that of the at-fault driver, and provided that you’ve reached a settlement with the at-fault driver’s liability carrier, your own policy will cover an amount up to the difference between your coverage and that of the at-fault driver (this is yet another great reason to purchase liability coverage that exceeds the minimum).  Using Polly’s example, you would be able to reach a settlement with Polly’s liability carrier in the maximum amount of $30,000, and then recover the remaining $15,000 from your own policy.

That's awesome!  But wait...

I know what you’re thinking; won’t that mess up my premiums?  Most of the time, the answer is no.  Your premiums generally won’t go up because you use your uninsured and uninsured (what we call “UM/UIM”) coverage, but it could present some issues when you go to renew or amend your policy.  The bottom line is that you have to have a way to pay your medical bills.  You don’t want to deal with outstanding balances and collection agencies.  When you need the money, even if you weren’t at fault in the accident, your UM/UIM coverage can be a great place to turn.