Most people who own a car in New Jersey have insurance and are aware of their liability coverage, the amount their insurance will pay if they cause an accident. However, what many people do not realize is that nearly all policies come with UM/UIM coverage. You may have noticed the term and wondered what is was the last time you reviewed your declaration policy during your insurance renewal. UM/UIM stands for Uninsured/Underinsurance. UM/UIM coverage is the maximum amount that you have contracted with your own insurance carrier to pay for your damages if another person is more liable for the accident than you are and the other person: (1) has no insurance coverage; or (2) has a liability policy that is less than your UM/UIM coverage. UM/UIM coverage is a way to help financially protect yourself from drivers who seem more worried about saving 15% or more on their car insurance than protecting others for accidents they cause.
How does UM/UIM coverage work? Let’s say you are in an accident where the other driver hits you from behind traveling 55 miles per hour while you were stopped at a red light. It this scenario, this is little doubt who is responsible for the accident. You are severely injured and the other driver only has $15,000.00 in liability coverage. If you have $300,000.00 in UM/UIM insurance, you would potentially be able to collect the $15,000.00 from the other driver and up to an additional $285,000.00 from your own insurance. In the same scenario, if the other driver was not insured, you could potentially collect up to $300,000.00 from your own insurance.
Let’s reverse the roles in the above scenario whereby you hit the car at the stop light. While your PIP (Personal Injury Protection) coverage would potentially pay for your medical expenses (depending on whether the PIP coverage is primary or secondary and if secondary, whether the primary insurance (usual medical insurance) is exhausted), you would not be able to collect upon the other driver’s policy since you were more responsible for the accident.
UM/UIM coverage is an important tool in helping to financially protect your greatest assets: yourself and your family. Typically for very little extra money, you can increase your UM/UIM coverage to equal the amount of your liability coverage. Please note that your UM/UIM coverage cannot exceed the amount of your liability insurance. In addition, there are numerous caveats to be aware of that can affect your UM/UIM coverage, some of which include:
(1) Stepdown provisions contained in your insurance policy: Some insurance policies contain provisions whereby the UM/UIM coverage you contracted for can be reduced (or even eliminated) in certain circumstances. For example, if you are listed as an insured on numerous policies (i.e. you have motor cycle coverage with one company and have your car insurance with another company), your policy may have a provision whereby the UM/UIM coverage is lowered to the amount of the lowest policy (typically the motor cycle policy). Sometimes coverage is eliminated if a spouse is the cause of the accident. There can be numerous step down provisions and you should review your policy carefully to understand your coverage.
(2) The other driver has a basic automobile insurance policy as authorized by N.J.S.A. 39:6A-3.1:
Liability insurance coverage is optional under these policies. If the other driver did not purchase the liability coverage, your UM/UIM coverage will not apply as: (1) they are not underinsured as they have no liability coverage; and (2) they are not considered uninsured as per N.J.S.A. 17:28-1.1(e)(2), which states in pertinent part: “‘Uninsured motor vehicle’ shall not include an automobile covered by a basic automobile insurance policy.”
If you have been injured in an accident due to the fault of another person, contact Laddey, Clark and Ryan, LLP to discuss your options.