Underinsured Motorist Coverage: When Your Car Accident Is Caused By A Driver With Low Insurance Limits

The financial responsibility laws of the State of California require drivers to carry liability insurance. By law, all drivers are required to carry liability insurance with a minimum coverage of $15,000.00/$30,000.00. This means that the maximum amount payable under this minimum liability policy would be $15,000.00 to any one individual. If more than one individual is injured, the most that the policy would pay out would be $30,000.00.

An obvious problem arises however if a person injured in an automobile accident incurs damages which are higher than the minimum limits of $15,000.00. For example, imagine that you are seriously injured in an automobile accident; you have suffered a broken leg which requires surgery, your medical bills exceed $20,000.00 and you have been out of work for several months. Clearly, your claim has a value which is higher than the other persons limits of $15,000.00. Often in these circumstances, the person with the low limits has no appreciable assets either. The result is a claim that has a value in excess of $100,000.00 that has to be settled for $15,000.00. That’s not a fair result.

There is a solution however. If the injured person has underinsured motorist coverage on his policy a claim can be made to recover for the full value of the damages caused. Underinsured coverage is coverage you must buy through your own agent before an accident occurs which protects you against drivers who have small policies. The coverage can be purchased in any amount but cannot exceed the amount of your own liability coverage. Therefore, if you have liability limits of $250,000.00 per accident you could purchase up to $250,000.00 of underinsured motorist coverage.

How would this coverage work in the example above? First, the claim against the other driver must be settled for the full amount of the coverage, i.e. in this case $15,000.00. Proof of the settlement and proof of the other person’s limits must be provided to your own underinsured motorist carrier. Next a claim is made against your own underinsured motorist carrier for the full value of the claim. In the example above, let’s assume that the value of the claim if $175,000.00. From this amount your carrier gets a credit in the amount you previously received from the underinsured driver–in our example this is $15,000.00. Your underinsured motorist carrier would then be liable to you for the remaining $160,000.00. This coverage applies anytime the other driver has a policy that is smaller than yours. So in our example, if the other party had a $50,000.00 policy, you could still make a claim and be entitled to an additional $125,000 from your own carrier.

In conclusion, if you have low underinsured limits, you should increase them to an amount which you feel adequately protects you. As a personal injury lawyer in Alameda and the Oakland area for over 27 years, I have handled many underinsured motorist claims. If you have questions about the appropriate amount of coverage I would be happy to discuss it with you. If you have been injured in a car accident and you have questions about underinsured motorist coverage, I can provide you with a free consultation.


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