“What do the numbers such as ‘$20,000/$40,000’ mean on my insurance policy?”
A question that we are often asked (and usually too late, after someone has already had an injury accident) has to do with how much insurance coverage they have. This is especially important to know if the other driver caused a serious injury accident. For purposes of this posting, we will discuss only coverages that apply to pain and suffering damages.
Take a look at the sheet that comes with your car insurance policy every time you renew. This is called the “declarations page” because it lists (declares) the amounts and types of coverages you have chosen, as well as how much you are paying for each.
You are covered up to the amount shown on the “bodily injury” or “personal liability” line on the declaration page. This is usually the first category listed on the sheet. You will see a code that says something like “20/40” or “100,000/300,000 per occurrence.” Occasionally, the line will read something like “250,000 single limit,” or “250,000/250,000.” What does all that mean?
Bodily injury coverage applies to the person who caused the accident. It is the maximum the insurance policy will pay, no matter how badly the at-fault driver injures someone. In the example of $20,000/$40,000 coverage, the driver who caused the accident has insurance that will pay up to $20,000 for any one person who is injured due to the fault of a covered driver, and up to a total of $40,000 for two or more victims.
Single limit coverage means that the policy covers up to a particular amount, and the victims can dispute among themselves how to split it up, it they qualify.
This doesn’t mean that the insurance automatically pays that much if the insured driver hurts someone-it’s simply the maximum that will be paid out. After that, the at-fault driver, which could be you, is on his or her own for damages above the coverage limits.
Now take a look at the line that says “Uninsured/Underinsured” coverage. Again, there will usually be an entry such as “$100,00/$300,000 per occurrence.” This means that you have coverage up to those amounts if you are injured by a driver who doesn’t have any insurance (uninsured), or who has less coverage that the amount you are carrying for this category (underinsured). Once again, you don’t automatically get these amounts if you are injured—you have to file a claim, or even a lawsuit, and fight to prove what you are entitled to. Lawyers call this “UM/UIM” coverage.
Michigan law requires that you carry a minimum of $20,000 per victim and $40,000 total on your liability coverage. That is not much coverage, and it doesn’t go very far if you cause a serious accident. Over and above those amounts, you may be personally liable to pay additional damages, and depending upon the circumstances, you may not be eligible to declare bankruptcy and try to escape financial judgments for damages above your policy limits.
It has been many years since this portion of the insurance code was changed-we certainly believe that everyone should carry as much liability coverage as they can afford, and should have at least $100,000 uninsured/underinsured coverage, too. Take a look at how inexpensive UM/UIM coverage is compared to the other items you pay for on your car insurance bill. It makes sense to buy a lot of UM/UIM coverage. You are insuring yourself and your family against the rest of the driving public doing something careless and causing you harm. Often, the worst drivers also have the least insurance-or none at all. Protect yourself—buy lots of UM/UIM!
You should go over your policy and make sure you have the types and amounts of coverage that will protect you if you cause a serious accident, or if you are involved in an accident that is the fault of a driver who either does not have much coverage, or who may have none at all. Now that you know what the numerical codes mean, this should be easier to do, and simpler to price out.