Did You Know? Underinsured Motorist Insurance


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.