UM Coverage v. UIM Coverage
UM coverage is referred to as underinsured or uninsured motorist coverage generally. However, there is a distinct difference between Uninsured with UnderInsured coverage.
While both coverages protect you against a driver without valid insurance, Underinsured goes a step further. This coverage applies when the other driver does not have adequate limits to pay for property damage (UIMPD) or bodily injury (UIMBI) claims they are legally obligated to pay.
Each state has different contractual requirements your insurance company must follow. In Georgia, the consumer has an option to purchase “Added On” or “Reduced By Limits” coverage. The Added-On option in the most simplistic term, adds the limits you purchased to those of the at-fault party. Reduced-By then means your limits are reduced/subtracted by those of the at-fault party.
To help explain, assume an Underinsured driver rear ended your vehicle and has the State of Georgia minimum limits ($25k bodily injury and $50k property damage). You suffered medical bills that are $100k. If you selected the Added-On option with limits of $100k, your limit is $125k ($25k bodily injury plus $100k of bodily injury. Let’s say you only purchased the Reduced-By option assuming the limits and injuries above. As a result, your insurance policy would only have $75k of coverage to provide ($100k injuries subtracted by $25k at-fault party’s bodily injury limit).
With the increasing cost of medical treatment, a trip to the emergency room by ambulance can almost eat up half of a minimum policy ($25,000). If the injuries are significant and additional treatment is needed, medical costs can quickly sky rocket. It is not only important to have proper liability insurance in the event you cause a collision that injures another party, it is equally important to have adequate UM and UIM coverage to protect yourself. Those who have proper coverage never regret paying a few dollars extra on their car insurance bill when it comes to collecting on a UM policy.