Commercial Auto Policy Basics: Uninsured Motorist and Underinsured Motorist Coverage
Issue #24
September 17, 2007
As if learning that an employee was involved in an accident on company time isn’t alarming enough, what happens when you find out the at-fault driver doesn’t have coverage or is underinsured? While most states require drivers to maintain auto insurance, according to a 2006 Insurance Research Council (IRC) study, if a person is injured in an auto accident, there is about a one in seven chance that the at-fault driver will be uninsured.
The IRC study indicates that the magnitude of the uninsured motorists’ problem varies widely from state to state — from four percent in Maine to 26 percent in Mississippi.* On average, that translates to about 15 percent, up two percent since 1999. Uninsured motorist (UM) and underinsured motorist (UIM) are coverage options added to your commercial auto policy for transferring the risk in such unfortunate circumstances.
Coverage Overview
In the event that a driver and/or passengers are injured due to the negligence of an uninsured or underinsured driver, you may seek compensation for injuries and damages through the UM and UIM portions of your policy.
- Uninsured motorist coverage kicks in when the at-fault driver can’t pay up due to lack of insurance.
- Underinsured motorist coverage kicks in when the driver’s liability limits are lower than the costs of the accident.
The coverage typically has two components, but it varies from state to state:
- Coverage for bodily injury provides insurance for medical bills, funeral expenses, lost wages, pain and suffering, disfigurement and permanent or partial disability.
- Coverage for property damage provides insurance for auto repairs, a total loss, a rental car and damage to personal items carried in the vehicle.
Additional coverage considerations include:
- For UM/UIM to pay, it must be established that the other driver was at fault. Comparative negligence allows for more than one person to be at fault for an accident. As a result, your company can reduce the settlement of your uninsured/underinsured motorist claim by the percentage of fault attributable to you.
- UM coverage pays losses up to the coverage limits from an accident caused by a hit-and-run driver, but be sure to report the accident promptly.
- Commercial excess liability policies typically exclude UM/UIM coverage.
Coverage Limits
A risk management best practice for UM/UIM is to set the limits equal to your commercial auto bodily injury and property damage limits. Since UM and UIM coverage protects you, adequate limits are critical. Please contact us to learn about all the limit options available.
