Uninsured/Underinsured Motorist Coverage: Critical Coverage or Scam?

Ok, I’ve been struggling with this ever since Christian at the nameless blog introduced to my head that uninsured/underinsured motorist coverage might not be a good idea. I had it at $250k/$500k/$10k mostly because I thought it was required to maintain my umbrella insurance. It turns out this is partially true. If I keep it like this, I also get $1M coverage for myself and my family under the umbrella policy. However, I can drop that part and still have the $1M liability coverage against being sued by others. And that’s my main worry, being sued by another driver.

There seems to be two schools of thought on uninsured coverage: Either drop it completely, or buy as much as you can afford.

Drop It Completely, It’s a scam
This line of thinking states that you don’t need this if you get into an accident with an uninsured driver, because

a) Your health insurance will cover your medical bills.
b) Your collision insurance will cover your car damages, although you have to pay your deductible. With uninsured coverage, no deductible.

After confirming with my agent, it’s true that if get in an accident with an uninsured motorist and I don’t have uninsured coverage, I’ll just have to pay my $1,000 deductible. I’m ok with that.

There are a couple problems with this theory that I can see. First, you need good health insurance that covers you in a car accident. Some actually specifically exclude car crashes where it is someone else’s fault. Also, many people these days have a very high annual deductible, or even just have to pay 20% flat of all medical bills. And what about lost pay and also future wages? That can get pricey.

Buy as much as you can afford
This theory basically focuses on the idea that this is where you are buying insurance for yourself and your family, versus liability coverage for others. Now, if you get hurt in an uninsured accident, you don’t have to depend on the guy with no or even the legal minimum $15k of coverage. You have your own $100k, $250k, or even $1M of coverage. No need to get your health insurance involved and pay and deductibles. Of course, this means you will be asking your own insurance company for money, and will probably want a lawyer on your side. You want to get everything you can, lost wages, future wages,”pain ansuffering” damages, etc.

I’m somewhat in the middle… I guess it’s all about how much you’re paying and that risk/reward balance… What do y’all think?


  1. Apparently, whole Insurance thing is scam.
    We are discussing this over at Joel’s forum.



    Btw, can you put the Email to Friend form below the comment form? I think of it as Comment form and type my stuff in there. Does anyone even use it?


  2. Hmm… I don’t know about all insurance being a scam… It’s just a way of sharing the risk. Obviously, insurance companies want to make a profit. But houses burn down, hurricanes happen, etc. I agree that insurance was initially designed and should be kept focused to prevent catastrophic disasters. If you’re protecting against something that say, costs a couple hundred dollars, why bother.

    Thanks for the tip on moving the form, didn’t mean to cause any confusion. It’s all automated and I don’t see emails or even if someone used it.

    • John Rowland says:

      Oh it is a scam alright. If you read the policy it states they will pay what a court finds the uninsured motorist is liable for. However you must ask the insurance companies permission to sue, guess what their answer will be. So you can’t sue them because the insurance company won’t grant permission to sue and if you do sue them anyway guess what they didn’t have enough money to pay for insurance you think they will be able to pay what the court finds they owe.

  3. I don’t sell insurance – just to be clear! I say carry as much UM as you can – there are so many uninsured drivers out there. I know insurance laws vary state to state, but in Florida, the coverage called “personal injury protection” (PIP) pays medical bills and lost wages, usually up to $10K. Does anyone know what back or neck surgery is going for these days? I do – in my area, the surgeon’s bill is $20-$30K and the hospital is about the same. UM coverage is for permanent injuries, future medicals, future lost wages and pain and suffering. I cannot recommend it enough, guys!

  4. Nick Bolas says:

    I am an insurance agent for affluent individuals and in today’s school of thought I really have to say buy as much as you can afford. You hit on the two schools of thought. That was very nice. I have to add, however, why would you insure someone else-that’s your liability coverage-for more than you would insure yourself-UM/UIM? That’s really the way to think about it. I myself have an excess over my primary that include UM/UIm at $1M. You hit the nail on the head for future wages, lost income, etc. In essence, if a UIM/UM driver hits you and you are young, or wealthy, or even average-and you can no longer work, crippled, etc. you would be able to collect up to your policy’s UM/UIM limit any amounts, less punitive (in most states) that a judge or jury awards you. Your health insurance, as stated, doesn’t cover, or not much, this judgement.

    Now, remember, in a lot of states UM/UIm is only bodily injury coverage and does not provide coverage for the damage to your car due to a UM/UIM. That coverage is called UM Property Damage coverage (UMPD). Look for the third number 20/40/10, as an example on the UM coverage to see if you have any. In this case you would have $10K. As was said, this is also subject to your collision ded. But what if you have no collision coverage? Generally, you can still have UM property damage coverage, you just want to make sure you have UMPD coverage which generally includes a deductible-say $200 or $300.

    So what limits can you get? Your auto policy should match your UM/UIM and liability. That’s a no brainer. I think all people, in today’s litigious society, sould have an excess of $1M with matching UM, if you have an auto. The cost for one home, one vehicle with excess UM, and liability at $1M should be around $300-$350 annually. Many companies do not offer excess UM past $1M. Other do at $5M and $10M. The cost if minimal on those companeis, say $400 to $500 for each $5M in coverage.

    Hope this helps

  5. Susannah says:

    Doesn’t the umbrella policy cover some of this? I remember when my mother was hit by a man who was underinsured, the insurance agent told her that if she’d had the umbrella policy, she would have probably collect the full million from it (she was hurt very badly, flown to the trauma unit in a helicopter, the doctors were surprised she survived, and still has many lasting effects). Does it depend on the umbrella policy?

  6. Greling says:

    “UM coverage is for permanent injuries, future medicals, future lost wages and pain and suffering.”

    Private disability insurace, health insurance, and Social Security should already cover those bases. IMHO, UM insurance is a scam.

  7. I am an insurance agent who works for an agency that has existed for over 100 years, so I hope we are doing something right. Last year we had 1 client who was hit by by underinsured motorist AND one of our employee’s sons was also hit by an underinsured motorist. Both clients had EXCELLENT health coverage but they maxed out their benefits while in the hospital. Thankfully they both had excess um coverage to help pay their hospital bills. It is not uncommon for us to see hospital bills in the hundreds of thousands.

    This is NOT a scam and I would NEVER consider writing a policy without it. It is certainly on my own policy. This is the MOST important coverage we sell and NO your other benefits do not always cover this. Something like cancer insurance, this is not necessary and you can pick coverage up elsewhere. In no way shape or form is excess um coverage a scam.

  8. I’m an attorney who has seen plenty of lives turned upside down by uninsured/underinsured motorists. Those who think this coverage is a scam are clueless – seriously. Example, you are hit by a driver and fracture your neck or back and can’t work for a year or two. Even if you had health insurance through your employment, it will eventually be gone because you can’t work. Then, you are stuck with your state’s disability benefits, usually limited in amount and duration to a fraction of your actual pay. Your UM coverage, if you were smart enough to have it, will cover not only your medical bills, but also your lost income AND PAIN & SUFFERING. If you carry less than $100,000 in UM coverage, you are foolish. I usually recommend at least $500,000. The additional premium is usually nominal.

  9. Yes, if this was a perfect society where every driver was responsible and carried a high level of insurance, there would be no need for it. Nowdays, so many driver’s that don’t even have a driver’s license are on the road! Say nothing about the ridiculous level of underinsured drivers out there. In a serious accident you’ll be out of work for several weeks, at minimum, when you count the hours in medical, rehab, and administrative time over the ordeal. How much is that worth to you – if you sit at home and lounge around I suppose not a lot, but an average worker these days can’t afford to be without it. So, moral of the story is that if you already have several million bankrolled somewhere then do without it, else, buy the insurance.

  10. How do you know if the settlement your insurance company is offering is the best? I was rear ended by an uninsured motorist in MO.


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