The Importance of Underinsurance Coverage1/17/2017 | By: Mark B. Brenner, Esq. | GDB 2017 Winter Newsletter
Nearly everyone understands that it is important to have automobile insurance. Auto insurance shifts the risk of loss resulting from the failure to exercise due care while operating a motor vehicle from its owner and operator to an insurance company, up to the limits of coverage. It is required by law.
When you purchase auto coverage, it is important to obtain sufficient additional uninsured/underinsured coverage, to protect yourself against damages caused by an uninsured or underinsured driver. With such coverage, if you or a family member is in an accident with a vehicle that has less liability insurance coverage than you have under your policy, then you may pursue recovery for that loss against your own carrier for that difference in liability coverage up to the limits of your underinsurance coverage. People seldom recognize that their underinsurance coverage is inadequate until after they are involved in an accident with a vehicle that carries no insurance or minimum insurance.
Presently, New York State law only requires motorists to carry a minimum amount of liability insurance of $25,000 for bodily injury to one person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any one accident. Mandatory "no-fault" coverage of $50,000 is also required. Many - but not all - motorists carry higher liability limits and additional personal injury protection beyond these minimum benefits required by law.
New York law also requires all auto insurance policies to provide uninsured motorists coverage (for bodily injury,) subject to the same minimums. The “uninsured/underinsured endorsement” to an auto policy includes coverage for injuries sustained in an accident with someone who either has no insurance or leaves the scene of a hit and run accident. New York State requires every car owner to have at least $25,000 per person ($50,000 per accident) in uninsured/underinsured motorist coverage for personal injury.
With regard to taxis, limousines, and ride sharing services, there are no state-wide requirements to have additional insurance beyond these bare minimums. Only in New York City are there additional requirements, where New York City livery car services and ride sharing services are required to have coverage of $100,000 per person, $300,000 per occurrence.
Most taxis, limousines and loaner cars are separately owned by a legal entity that has limited assets and the minimum insurance coverage required by law. For this reason, if you are involved in an auto accident, the risk is high that the other car will have less coverage than you carry on your car.
Various legislative efforts have been attempted (and have failed) to address this issue, through proposed legislation that would have either required ride sharing service cars to carry a higher amount of insurance state-wide, or required everyone to have uninsured/ underinsured coverage that equaled one’s liability coverage unless one chose not to have it.
To protect yourself, we recommend buying more “underinsurance coverage” for you and your family so that you each have at least as much protection from losses caused by others as you have to protect others from losses caused by you. If you are concerned that obtaining as much coverage for you as you carry for others doubles your insurance bill, it does not. The cost of underinsurance coverage is significantly less than the cost of liability coverage. By way of example, someone who pays $1,539 per year for $250,000 of liability coverage can obtain an equal amount of underinsurance coverage for $211.00 per year. Different brokers and carriers may charge different amounts for similar coverage, but the price differential should be similar.
Accidents happen. Having adequate underinsurance coverage to compensate you or your loved ones if injured due to the negligence of others who carry less insurance than you can provide some comfort during a difficult time.