Understanding uninsured and underinsured insurance coverage

VIDEO TRANSCRIPT:

Hello everybody. This is Robert Mansour . Today I wanted to make a video about how uninsured motorists works. If you have uninsured motorist coverage on your auto policy, which I hope you do ... It a very important piece of insurance, you have to understand how it actually works. Let's say you have uninsured motorist of say, $15,000.

What that means is, if the responsible party in the accident has zero insurance - doesn't have any insurance at all - at least you can turn to your company and say, "Hey...the responsible party was uninsured. Therefore, my uninsured motorists policy should apply." You will get coverage up to $15,000. Now that doesn't mean you'd get a check for $15,000. That means that they will pay up to $15,000. If your case is worth say, $5,000, they're not going to pay you $15,000, even though they are your insurance company. That's the limit - $15,000.

Now, let's talk about how uninsured motorist policies also work. Uninsured motorist is often equivalent to something called underinsured motorist. What is underinsured motorist? Underinsured motorist, is when the other part has insurance, but they don't have enough. Let's say you have a serious injury, and let's say your case is worth say, $100,000 for the case of our discussion right now.

Let's say the other party, the responsible party, had $50,000 in coverage. Well, what you could do is you can take the $50,000 from the responsible party, provided they offer it to you. And then what you can do is then you can turn to your company and say, "Hey...the responsible party only had $50,000. My case is worth more than that. I would like to tap into my $100,000 underinsured motorist policy."

Now, often times you will see it on your policy. It'll say, uninsured/underinsured (UM/UIM). They often go together. How does that work? Well, your insurance company would then open a claim for you, or you would open a claim and they would help you with that. And then, they would say, "Okay, you got $50,000 from the responsible party. We think your case is worth $75,000. You might say, "Well, I think my case is worth $100,000. I should get all the money!"

They say, "Well, we don't agree with you." You can see there could be a disagreement between your company and your evaluation, or your company might agree with you. Your company might say, "Yeah...your case is worth $100,000" or they might say, "You know what? You got $50,000 from the responsible party. That's enough. We don't think your case is worth anymore than $50,000. We think you've been adequately compensated."

Here's the thing. Even though now we understand that you and your insurance company may have a difference of opinion. Here's how it would work mathematically. Let's say for example, you and your insurance company agree that your case is really worth $75,000. Don't forget you have a $100,000 policy available to you. If they and you agree, $75,000, what they do then is they subtract what you got from the responsible party. In our example, you got $50,000 from the responsible party.

What that means, is they would say, "Okay, $75,000 value, minus $50,000 you got from the responsible party. We will give you $25,000." If you add the $25,000 to the $50,000 you got from the responsible party, that equals $75,000. Your insurance company effectively gets a "credit" for what you got from the responsible party. Now, that stands to reason. Remember, if the responsible party has zero, your insurance company's going to subtract zero. They're going to pay you the entire amount that you and your insurance company agreed to.

Now, if you an your insurance company cannot agree to the value of the case and you think it's worth $100,000 or $200,000 or whatever, and they think it's worth $75,000 - well in that particular case, what most often happens is you might have to enter into something called "arbitration" with your company. You and your insurance company basically go to battle with one another - but in the context of arbitration, which is a little, bit less formal than going to court.

You would hire an arbitrator that both sides agreed to. The arbitrator would hear the case. Usually this arbitrator is a retired judge in most cases. They hear the case. They listen to both sides just like a "mini trial" and then they make a decision that both sides have to live with. That's a little bit of an explanation as to how uninsured motorists and underinsured motorists work. I hope you found this video helpful. Thank you very much for watching. ​