Explaining Automobile Insurance: Part II – Underinsured and Uninsured Motorist Coverage

Underinsured Motorist Coverage: As the examples in my previous post demonstrate, in light of the high cost of healthcare today in Chicago, it is very easy for the value of personal injury cases to exceed the state minimum liability limits of $20,000. So what happens if you suffer personal injuries and the at-fault party did not purchase sufficient insurance?

In this scenario, insurance companies offer what’s called “underinsured motorist coverage” (“UIM”). UIM insurance is coverage that you can purchase to fill the void left when someone who did not purchase sufficient insurance ends up injuring you. It happens more often than you realize. Just look around next time you’re driving and see how many cars you see that are 10+ years old. To illustrate this scenario, imagine someone rear ends you, and your medical bills total $60,000, but the at-fault driver only bought a state minimum “keep you legal for less” insurance policy with only $20,000 in liability coverage. The at fault driver’s insurance company is only obligated to pay the first $20,000 to settle your case, leaving you responsible for the next $40,000 in medical bills. However, had you purchased $100,000 in underinsured motorist coverage when purchasing your own automobile insurance, you could then make a claim against your own insurance company for the $80,000 difference between your underinsured motorist limits and the $20,000 offered by the at fault insurance company. Purchasing underinsured motorist coverage is the only way to protect yourself from the harsh economic realities of the world we all live in. Also, compared to liability insurance, underinsured motorist coverage is relatively cheap.

Uninsured Motorist Coverage: What if the person that hit you had no insurance at all? This is an unfortunate fact of life as well. Often times, when someone has been involved in multiple poor driving events, insurance companies will refuse to insure that person any longer. Also, people lose their jobs and see their auto insurance premium as something they can cut back on. Or people simply lose their bills and forget to pay on time. Also, what if the person that hit you just immediately flees the scene, leaving you no opportunity to even ask if they are insured? In these instances, insurance companies offer what’s called “uninsured motorist coverage” (“UM”). UM insurance is coverage that you can purchase to fill the void left when someone injures you but either leaves the scene (“hit and run”) or stays, but does not have valid insurance. If you are injured and you had previously purchased uninsured motorist coverage, you then can make a claim with your own insurance company, who will pay out on your claim up to the limits of the uninsured motorist coverage you buy. Similar to underinsured motorist coverage, uninsured motorist coverage is often relatively cheap.

As one of the first people to speak with someone following life’s tragic events, it is my extreme displeasure to often have to inform people that while they’ve suffered greatly, sometimes in a life-altering manner, the person who inflicted this suffering on them won’t be able to help make them whole again. I then investigate whether or not they protected themselves from this scenario with un- or underinsured motorist coverage. Every once in a while, people in this situation don’t, and it’s the worst part of my job to tell them that their only option is bankruptcy. Do yourself a favor and make sure that you are not just purchasing automobile insurance sufficient to protect the people you might hurt from financial disaster, but also looking out for yourself.

Explaining Automobile Insurance: Part I – Liability Coverage

I am never surprised to meet someone who does not fully understand their car insurance policy. Frankly, I didn’t understand my own until I became a plaintiff’s personal injury attorney. However, in order to make smart financial and consumer decisions as well as protect yourself and your loved ones in the event of disaster, it is important that you understand these complex insurance contracts.

“Bodily Injury / Liability”: When you purchase car insurance, you are always purchasing, at a minimum, “bodily injury / liability” insurance coverage. Illinois law requires that drivers carry a minimum of $20,000 per person/$40,000 per occurrence in liability insurance coverage. (625 ILCS § 5/7-203) This coverage protects you in the event you are at fault for a collision and you cause someone injury. Not only are you purchasing a right of “defense”, meaning your insurance company will retain an attorney to defend you, you are also purchasing a right of “indemnification”, meaning it will also pay out any settlement or judgment, up to the per person/per occurrence limit you purchased. By purchasing this coverage, you are protecting yourself and the wealth you have built up over your lifetime against a lawsuit should you negligently injure someone.

“Per Person / Per Occurrence”: When you purchase bodily injury / liability insurance, it is most always sold in “$X per person / $Y per occurrence” bundles. The “per person” limit means that if you are at fault and injure only one person, your insurance company will pay any settlement or verdict up to the maximum of the “per person” limit. However, should you be at fault and injure multiple people, your insurance company will pay settlements or verdicts for all of the victims collectively only up to the “per occurrence” limit. For example, if you purchase a state-minimum “20/40 policy” and rear end a car with only one person in it, and his or her damages total $25,000, your insurance company will pay up to $20,000 to settle your case, or the first $20,000 of any judgment against you. However, should you rear end a car with three people in it, and they suffer damages of $25,000 each, your insurance company will only pay up to $40,000 total to settle all three cases, or the first $40,000 of any judgments against you, rather than $20,000 per case or $60,000 total.

How much bodily injury / liability insurance should you purchase? You should always have more insurance coverage than your net wealth. If you do not, you run the risk that someone you might negligently injure could refuse to accept a settlement for the limits of your insurance policy and proceed against your personal assets. Add up the value of the things you own: your house, your car, your savings, etc. Consider how often you drive, and how congested the area you drive in is. Are you putting yourself, and the fruits of years of your hard work at risk? Don’t let a small problem become a life-changing problem because you failed to protect yourself ahead of time.

Thank You!

There have been a lot of people congratulating me on starting my new business lately, sometimes even embarrassingly from judges in the middle of court. I’m grateful for every person who has helped me along the way – other lawyers who have helped teach me my trade or referred me cases, clients who have trusted me despite my youthful appearance, my family and friends, who provide invaluable support, and my late father, who left me the capital to make it all happen. I look forward to living up to all of your expectations.


Welcome to the Spencer Law Offices new blog page. Spencer Law Offices, P.C. represents victims of serious personal injury, wrongful death and medical malpractice in the pursuit of justice. The firm practices law in Illinois and southeastern Wisconsin. All of the firm’s clients come from personal recommendations.