Some drivers say “I don’t have any assets to protect, so all I need is State Minimum levels of liability insurance.”  Having State Min’s also means you have very little Uninsured (UM) or Under Insured Motorists (UIM) liability insurance. UM and UIM protects YOU and those in your vehicle when someone else causes an accident and they don’t have any insurance or as much insurance as you do. These coverages basically pay for the following types of claims:

• Medical bills
• Loss of wages
• Pain and suffering
• Death Benefits

Each of these loss areas is significant. Of these four items, Loss of wages or the ability to earn a living is a significant long term issue. For example: if you are disabled and can’t work at the age of 30, you will face significant financial issues for many decades. 

Case in Point

About 25 years ago I met with a household consisting of an elderly women and her 30 something daughter. The daughter, we will call her Mary, had significant disabilities from an accident which had occurred about 5  years earlier. Due to extensive rehab, Mary was able to operate a motorized wheel chair, drive a car and go to work.

Because of her disabilities, her living expenses were much higher than people who are not disabled.

She had to have a motorized wheel chair. The van she purchased had a lift for the wheel chair and special controls to enable her to drive. Many aspects of her home were modified so she could do normal things such as get in and out of her home, cook, sleep, do laundry, use the bathroom etc. Someone else had to mow the lawn, shovel the snow and take care of other home issues.

On the income side, her disabilities greatly limited her ability to earn a living. The jobs she could now perform paid her much less than what she earned previously.

The combination of higher living expenses and limited income took a significant toll on her finances, even though she lived with her mother to share expenses. Her mother was elderly, was living on a fixed income and had some health related issues and limitations.

At the time of the accident, Mary had $250,000 of Uninsured / Underinsured Motorist coverage for each person in an accident.  She received the full amount due to her injuries. Much of that settlement was spent for the actual medical costs. What remained had been used to purchase the van and to modify / operate the home etc.

When I talked with them, they expressed some of the following concerns:

• How much longer will her mother be able to help physically and financially?
• What was going to happen when her mother was not able to help her financially?

Mary’s plight is typical of many who are disabled due to an auto accident. For younger drivers this is a significant risk. The younger you are the more UM/UIM coverage you need to protect your ability to earn a living. As you get closer to retirement the need for UM/UIM decreases. When you retire you will have income whether you can work or not.

Another issue is the sense that some younger drivers have of invincibility or that it won’t happen to them. We’ve seen too many of those “It will never happen to me” predictions go horribly wrong.

Now let me summarize the problem with State Minimum insurance and the resulting lower UM / UIM coverages. Younger drivers need as much UM/UIM coverage as possible to protect their ability to earn a living and sustain themselves. Unfortunately, most insurance carriers limit the maximum amount of UM/UIM coverage to no more than the amount of your Bodily Injury (BI) Liability limits. So if you have state minimum BI limits of 25/50 or $25,000 of Bodily Injury coverage per person and $50,000 of Bodily Injury coverage per accident, you can only get $25,000 of UM/UIM coverage per person.

The question is: “How long will $25,000 last you if you are disabled?”

Cheap insurance can be VERY expensive when you use it. If you have State Minimums or anything close, let’s talk about this.

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