Why You Should Purchase Optional Uninsured/Underinsured Motorist Coverage

What is Uninsured/Underinsured Motorist Coverage?

Under Hawaii law, each auto insurance policy must include liability coverage of at least $20,000/person, $40,000/accident. Your liability coverage pays damages to others resulting from your covered negligence. Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage is essentially the “mirror image” of liability coverage. UM/UIM coverage protects you, other people named as insured under your policy, and your resident relatives from the negligence of others. Although UM/UIM coverage is optional under Hawai‘i law, insurers are nonetheless required to offer the coverage on every auto policy. To reject UM/UIM coverage, you must sign or initial a form confirming your rejection. If your current policy lacks UM/UIM coverage, it’s because you expressly chose not to buy it.

Reasons to Buy (Or Buy More) UM/UIM Coverage

1. Uninsured drivers are a significant problem in Hawaii. Check the dockets of Hawaii’s District Courts. Moreover, many vehicle owners can afford only the required minimum automobile liability insurance coverage ($20,000/person, $40,000/accident). That minimum coverage is frequently insufficient to fairly compensate victims of negligence. If you are seriously injured in an auto accident, the fair value of your liability claim against a negligent third-party could easily exceed the $20,000/person, $40,000/accident minimum on his or her auto policy.

2. Liability coverage usually comes with aggregate “per occurrence” or “per accident” limits in addition to “per person” limits. That means, if more than two injured people are covered by the same policy in the same accident, they will be forced to apportion the “per accident” limit and no one claimant can recover more than the per person limit. In other words, the more people injured at the same time under the same coverage, the less money each injured person can potentially recover in compensation. The maximum size of the pie is fixed; how much coverage each person can access is dependent on the number of slices and the size of the slice to which each person is arguably entitled.

For example, consider the horrific motor-vehicle/pedestrian collision on January 29, 2019 at the intersection of Kamakee Street and Ala Moana Boulevard. The driver of a pick-up truck allegedly lost control of his vehicle and hit several pedestrians waiting to cross the street, killing three and seriously injuring five others. Even if the allegedly negligent, intoxicated driver carried a responsible amount of auto liability insurance—say, with limits of $100,000/person, $300,000/accident—the five people seriously injured would be forced to share the total $300,000 per accident policy limit with the families/estates of the three people killed. In this sort of tragic situation, the surviving victims and families of the deceased end up grossly undercompensated for their losses, especially the wrongful death claimants. The hypothetical policy would pay out no more than $100,000 per death under the driver’s liability coverage, but under the circumstances the families/estates of the deceased would ultimately get even less after apportioning the $300,000 per accident limit among all other claimants.

3. UM/UIM coverage, similar to no-fault PIP coverage, often travels with you, protecting you and others insured under your policy when not in your insured vehicle. If you, others insured on your policy, and/or your resident relatives are injured while cycling, walking, or traveling in the vehicle of another, you will probably be able to access your UM/UIM coverage if there is no or insufficient coverage available through the negligent driver and/or through any other applicable automobile policies.

4. UM/UIM coverage stacks on top of any applicable liability coverage. For example, say that you have UM/UIM policy limits of $100,000/$300,000. If you are injured by a negligent driver with the same limits under his or her liability coverage, you will be able to access up to an aggregate $200,000 for any injuries you suffer ($100K from the negligent driver’s policy and another $100K under the UM/UIM coverage on your policy). Your UM/UIM coverage begins paying when the liability coverage exhausts and will pay out up to the full amount of the coverage. Hawaii law on UM/UIM stacking is different from other states. For example, in California UM/UIM coverage gets “credit” for any amount paid by the underlying liability coverage, so the total amount you can recover under both policies will not exceed the limits of your policy. Lucky we live Hawai‘i.

5. Most insurance companies will give you the option to stack the UM/UIM coverage on your policy if you have more than one vehicle covered under that policy. In addition to UM/UIM coverage stacking on top of liability coverage, you can also elect to stack your UM/UIM coverage on your own policy. Such stacking multiplies the policy limits by the number of vehicles covered under the policy. For example, if you have three vehicles on a policy with UM/UIM limits of $20,000/$40,000, electing to stack the UM/UIM coverage results in effective policy limits of $60,000 per person, $120,000 per accident. Of course, stacking will also result in a higher premium, but the increase in premium will be less than if you did not stack and increased the policy limits to limits of $60,000/$120,000.

Robert Klein