Uninsured Motorist Coverage (UM) is an optional coverage offered as a part of the Florida Personal Auto Policy. While Personal Injury Protection (PIP) and Liability are statutorily required, Uninsured Motorist Coverage (UM) may be rejected or excluded from the policy. But why would someone choose to exclude Uninsured Motorist Coverage (UM) from their auto policy? Perhaps to keep the cost of the premium down, but more than likely it is because the insurance consumer does not understand what this coverage does.

In order to best explain Uninsured Motorist Coverage (UM) we should quickly review the coverage of Personal Injury Protection (PIP) and Bodily Injury (BI). Understanding these two coverage features will help tie together the concept of Uninsured Motorist Coverage (UM). For a more detailed overview of PIP and BI, please refer to parts 1 & 2 of this auto blog series.

Personal Injury Protection (PIP) – PIP is a first party benefit in that it pays your medical bills for your injury(s) caused by an auto accident. It does not matter who was at fault in the accident, your PIP is primary. PIP pays up to a maximum of $10,000.

Bodily Injury (BI) – BI is a third party benefit in that it pays others on your behalf when you are negligent in an auto accident. It is designed to pay compensatory damages for “pain and suffering” claims associated with an injury. The policy will pay up to a maximum of the limits you have chosen.

Ok, let’s briefly discuss this conceptually. If you are at fault in an auto accident where both you and the other driver are injured, your PIP pays for your medical bills. Their PIP will pay for their medical bills. Your BI will compensate the other person up to your policy limits for compensatory damages if they have a “pain and suffering” claim associated with their injury(s). Seems simple enough… Let’s see what happens when we reverse the scenario. The other driver is at fault in an auto accident where both you and the other driver are injured. Your PIP pays for your medical bills and their PIP pays for their medical bills. Their BI will compensate you up to their policy limits for your compensatory damages if you have a “pain and suffering” claim associated with your injury(s). So what’s the point???? What if the other driver does not have enough BI coverage on their auto policy to compensate you for your “pain and suffering” claim? Or worse, what if the other driver is uninsured? Let’s define Uninsured Motorist Coverage (UM).

Uninsured Motorist Coverage (UM) – UM is a first party benefit in that it is a form of coverage to pay compensatory damages for “bodily injuries” under one’s own policy for amounts which would otherwise have been recovered from the liability insurance of another where either the other party is an uninsured motorist or who carries liability limits that are lower than that of the insured’s damages (underinsured). Although UM is not statutorily required like PIP and BI, it is statutorily governed. The statute (F.S. 627.727) describes what the coverage shall be and how it shall be offered.

Essentially what this is saying is; if someone else is negligent in an accident and you are injured and you have a “pain and suffering” claim and the other person is either underinsured for the value of your injury or is uninsured, you will be able to file a claim against your own policy for the compensatory damages associated with your injury.

When purchasing Uninsured Motorist Coverage (UM) you will have several decisions to make. First, you will need to choose the limits you wish to purchase. (It is highly advisable to purchase UM limits equal to the BI limits you have selected.) Uninsured Motorist Coverage (UM) is typically offered as a “split limit” coverage, similar to your Bodily Injury (BI) limits, where there are two numbers which indicate the coverage limits available. For example, a policy can include UM coverage of ten/twenty (10/20) where each number is represented in thousands. With a “split limit” policy, the first number represents the maximum payable to any one person and the second number represents the maximum the policy will pay when there is more than one person injured where no one person can collect more than the first number. There is also a Combined Single Limit coverage where there is only one number which represents the maximum Uninsured Motorist Coverage available per occurrence and there is no stipulation to the maximum amount any one person can collect. Auto insurance companies offer multiple limit options for Uninsured Motorist Coverage (UM). The range is typically anywhere between the minimum of 10/20 up to $500,000. The limits you choose are up to you, however, you may not purchase limits of UM which exceed your limits of BI.

Second, you will need to decide whether to purchase stacked or non-stacked UM. The discussion of whether to choose stacked or non-stacked UM is typically disregarded by both insurance agents and insurance consumers because neither understands the difference between the two choices. The general consensus from clients I speak with believe that stacked UM multiplies the coverage limits times the number of vehicles owned. And although this is somewhat true, there is more to the concept of stacking UM limits.

Non-Stacked VS Stacked UM

Simply put, non-stacked UM will pay, at the most, the limits shown on the declarations page regardless of the number of covered vehicles.

With stacked UM, the most your policy will pay in any one accident shall be the limit shown on your declarations page multiplied the number of covered vehicles. (This is that multiplier concept most of us are familiar with.) So, if you have a stacked UM policy with limits of 10/20 and insure two vehicles on the policy, the policy will actually pay up to 20/40.

What is not commonly understood about non-stacked and stacked UM is this; if you are in a vehicle you own and it is not shown on your policy as a covered vehicle, non-stacked UM coverage will not be afforded. With stacked UM the coverage will extend to any vehicle owned by the insured.

Let’s carefully parse this out to make sure it is clear. Both non-stacked and stacked UM will pay if you are in a covered vehicle. Both forms will pay if you are a pedestrian. Both forms will pay if you are in a non-owned vehicle. Both forms will pay if you are out of the State the vehicle is insured in. But…if you are in a vehicle you own and that vehicle is not shown on your policy as a covered vehicle, your non-stacked UM will not provide coverage.

Here are some examples of how you could own a vehicle and not have it be a covered vehicle:

• Grandma purchases a vehicle to give to her granddaughter as a gift. The vehicle is titled to both grandma and granddaughter. Granddaughter insures the vehicle. Grandma co-owns a vehicle that is not a covered vehicle on her personal auto policy.
• Mr. Smith owns a business and purchases a vehicle where it is co-titled to Mr. Smith and the business. The vehicle is insured on the business auto policy. Mr. Smith co-owns a vehicle with the business which is not a covered vehicle on his personal auto policy.
• Mr. & Mrs. Jones own two vehicles. One is insured in Florida where it is kept and the other is insured in Georgia where it is kept. The vehicle owned by Mr. & Mrs. Smith and insured in Georgia is not a covered vehicle on their Florida personal auto policy.
• Paul Peterson owns several vehicles and decides to sell one. For the sake of cost, he decides to remove the vehicle for sale from his auto policy before it is sold. By removing the vehicle from his personal auto policy, it is no longer a covered vehicle.

I know that was a huge amount of information. But it is so important that you, as the consumer, understand. Let’s look at an example to illustrate how the concept of Uninsured Motorist Coverage (UM) would be applicable and then I will wrap this up.

Example:

Jack has a Florida Personal Auto Policy with liability limits of 10/20/10. 

Jane has a Florida Personal Auto Policy with Uninsured Motorist limits (non-stacked) of 10/20.

Jane is driving her car and is stopped at a red light. Jack does not see Jane stopped in front of him and crashes into Jane’s car. Jack is at fault for the accident and Jane is injured.

Jane has a “pain and suffering” claim associated with her injury and is seeking compensatory damages valued at $15,000.

How does Jack’s liability respond? How does Jane’s Uninsured Motorist Coverage respond?

Jack’s auto policy will pay up to his maximum BI limits of $10,000 per person. Because Jane is seeking compensatory damages of $15,000 which exceeds Jack’s per person BI limits, Jack is underinsured for Jane’s injury. Since Jack is underinsured for the amount of damages Jane is claiming, Jane will have to submit an Uninsured Motorist claim to her own auto policy for the remaining $5,000 compensation.

Without Uninsured Motorist Coverage (UM), Jane would not be able to collect her full compensation for her “bodily injury damages”.

Statistics:

Recent statistic reports suggest that 24% of Florida Drivers are uninsured……………Let that sink in for a moment. That is just about 1 out of every 4 drivers. And of the Florida drivers who are insured, approximately 30% only carry the minimal limits of bodily injury required by the State of Florida. This means there is a high likelihood that if you are involved in an auto accident, the other driver will either be uninsured or carry low limits of liability.

The fact of the matter is; as long as you are driving on Florida roads, the statistical odds are against you. The best advice I can give you, when it comes to auto insurance, is to purchase the most insurance you can afford. Check with your insurance agent to see if you can increase your liability limits, make sure you have uninsured motorist coverage (UM) equal to your limits of liability and elect Stacked UM. The typical proclamation of the uniformed consumer after the accident happened is; “if I had known, I would have purchased more coverage.” Consider yourselves informed. You can’t you didn’t hear it from me.