Ensure Uninsured and Underinsured Coverage Exists Within Your Auto Insurance Policy

Ensure Uninsured and Underinsured Coverage Exists Within Your Auto Insurance Policy

In a world overrun with computer-animated geckos,
Paleolithic cavemen, bubbly spokeswomen, and catchy tunes, we are bombarded constantly
with the idea that choosing an auto insurance company is one of the most
important decisions we face in life.  Make
no mistake, insuring your vehicle is vitally important, but more important than
choosing an insurance company is choosing an insurance policy.  A very basic primer on North Carolina auto
insurance is helpful when evaluating your auto policy.

In North Carolina, like in most states, you must insure your
vehicle in order to use it.  The minimum policy
limits for auto insurance, pursuant to N.C.G.S.
§ 20-281
, are as follows:  (1)
$30,000 of coverage for injuries or death involving one person in a single
accident; (2) $60,000 of coverage for injuries or deaths involving two or more
people in a single accident; and (3) $25,000 of property damage coverage.

Chances are high that your policy carries at least these
minimum policy limits.  But better
practice may be to carry insurance with higher policy limits.  The reason is that if you are found to be the
“at-fault” driver in a serious accident where damages exceed your policy limits,
you may be personally responsible to pay the difference.  So what is an at-fault driver?

North Carolina is a “fault” car insurance state.  This means that whoever was at fault in an
auto accident is legally obligated to compensate for injuries or damages
resulting from that accident.  In a fault
state, an injured party seeks compensation from the at-fault driver.  (In contrast, a “no-fault” state requires
that an injured party exhausts his or her own policy limits—regardless of who
is at-fault—before she is entitled to seek additional compensation from the
at-fault driver.) 

Imagine that at-fault driver, B, crashes into innocent
driver, A, causing $50k of damages to A and/or her car.  Ideally, B carries auto insurance with policy
limits that exceed A’s total damages, and A attains compensation of the full $50k
from B’s insurance company.  But what if
B has no auto insurance, or what if she does, but the policy limits are
insufficient to cover A’s total damages? 
In such cases, A can recover if she has uninsured (“UM”)/underinsured
(“UIM”) motorist coverage.  UM/UIM coverage is required
to be offered in North Carolina, but you can “opt out” or decline that
coverage.    

UM/UIM insurance, while typically grouped together, covers two distinct situations.  First, UM coverage provides compensation for accidents caused by at-fault
drivers who have no auto insurance.  For
instance, adding to the above scenario, imagine that B was illegally uninsured,
but that A’s policy provided $60k in UM/UIM coverage.  Then even if B was legally at-fault, A’s own
insurance would cover the $50k of damages.  Second, UIM coverage provides compensation for accidents
caused by at-fault drivers who are “under” insured.  Under insured drivers have auto insurance,
but their policy limits are insufficient to cover the total damages.  For instance, imagine that B was insured with
maximum policy limits of $30k.  If A’s
damages totaled $50k, A could only recover $30k from B.  A would need to seek the additional $20k
elsewhere.  But if A’s policy provided UM/UIM coverage with a maximum of $60k, A could collect that additional $20k
from her own insurance company.

So, when making decisions about auto insurance on the
battlefield of incessant propaganda, shield yourself from insurance company
jingles, mottos, and characters, and wield knowledge about different coverage
options for your auto insurance policy. 
For the relatively cheap cost of UM/UIM insurance, I recommend that
you purchase this coverage from the company of your choice.

–Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation.  Please contact him at (910) 772-1678.

–Robert C. Ennis is a second-year law student at the University of North Carolina School of Law and is a summer associate with Hodges & Coxe PC