Debunking Some Common Auto Insurance Myths

From Insurance for Dummies by Jack Hungelmann

People often ask me why they should have to pay extra premiums because other drivers either buy inadequate insurance coverage or have no insurance at all. It’s not fair, I agree. However, if you buy the higher liability limits recommended in this book, the vast majority of other drivers are underinsured compared to your fine coverage. And since the process of collecting any amounts over the other driver’s insurance limits is laborious and expensive, the combination of Uninsured and Underinsured Motorists coverage is the most effective way to make sure you have adequate funds available to properly compensate you for your injury — an injury you did not cause.

You may object to the idea that the other driver (the underinsured) benefits from your good Uninsured and Underinsured Motorists coverage by avoiding action against him for damages.

Even though it may seem like the other driver gets away without having to carry insurance, that’s simply not true. The other driver is still held accountable. These two coverages just assure you that a pool of money is available to you that’s easily accessible and provided by your own insurance company. However, once you have been paid, you transfer your rights to sue the other party to your insurance company. The insurance company will then have the right to pursue the other party’s assets and income until it’s fully reimbursed. By buying these two coverages, you are compensated much more easily and quickly and you avoid the hassle and expense of chasing down the other driver for payment. You also avoid the risk that the other party may not have the resources to compensate you adequately for the damages caused in the accident.

You may think that by carrying Uninsured and Underinsured coverage, you’re duplicating coverage that you have elsewhere, such as in your personal health and disability insurance — or even the medical coverage of a car insurance policy. To some degree this is true. If you are injured by another driver, you can collect for your medical bills and lost wages from some of the other policies you personally own. However, none of your other coverages compensate you for the economic value of your pain and suffering the other driver caused. You’ve got only three sources for that compensation: 

• The other driver’s automobile liability insurance
• The other driver’s personal assets and income
• Your own Uninsured and Underinsured Motorists coverage

Therefore, if you want to make certain that you have adequate coverage to compensate you for your potential pain and suffering, the only sure way is by buying these two coverages. This, of course, begs the question: “How much coverage should I buy?

My recommendation is to buy as much protection for your own injuries (as caused by another) as you buy to cover the injuries you yourself cause to someone else. In other words, buy the same Uninsured and Underinsured Motorists coverage limits as you buy liability insurance limits to the extent those coverages are available in your state. Why? Because you are worth every bit as much as a complete stranger whom you might injure. Cover yourself accordingly.