DID YOU KNOW? Did you know that the Commonwealth of Kentucky requires every driver on
the road to carry liability insurance? This insurance pays for any damage
that may be caused by the insured driver to a third party who is injured
or suffers damage as a result of the drivers negligence.
Each state sets minimum insurance limits that must be carried. In Kentucky,
drivers are required to carry a minimum $25,000/$50,000 policy. This means
that, under the insurance policy, $25,000 is payable to any one person
injured, up to $50,000 total (so, for example, one person injured could
recover up to $25,000, and if two are injured, both could recover $25,000).
As you might imagine, there are situations where $25,000 is not enough
to compensate someone who has been injured. So what happens then? Someone
can accept the $25,000 and deal with not having enough compensation.
They can refuse to accept the $25,000 and try to get a larger judgment
against the negligent party. If, for example, they get a judgment of $100,000
and there is only $25,000 in insurance, the insurance would pay $25,000
and they would try to collect the remaining $75,000 directly from the
negligent driver. This is often difficult to do as most people don’t
have money laying around to pay judgments. Judgments can often times be
bankrupted. Most lawyers will not try and collect judgments (we have never
tried to collect a judgment against anyone personally).
Realizing the harsh realities of this situation, insurance companies offer
underinsured motorist (“UIM”) benefits. This insurance kicks
in and provides coverage in addition to the negligent party’s insurance
when there isn’t enough insurance available.
Assume that a driver has $25,000 liability insurance and rear ends someone
who has $50,000 UIM insurance. The medical bills are $40,000 and the injured
driver is entitled to $20,000 pain and suffering (so $60,000 total).
Without UIM insurance, they could recover $25,000 of the $60,000 they are
owed from the at-fault party’s insurance, and then either forget
the remaining $35,000 they are entitled to or try to collect it from the
person who hurt them.
If they have UIM insurance, instead of doing either of these things, they
can collect $25,000 from the at-fault insurance then turn to their own
insurance and get the $35,000 they are owed from their UIM coverage (recall
there is $50,000 available), all without having to try and collect a judgment
or deal with not having enough compensation.
Everyone should carry UIM insurance. You can buy as much coverage as you
want (it is not capped at $25,000). We recommend everyone to carry at
least $100,000 in UIM coverage, and if possible, $500,000. The coverage
is cheap in comparison to the protection it affords you. You can’t
control another driver having minimum limits, but you can control how
much you protect yourself.