Jul 262013
 

NJ car drivers are required to carry car insurance policies for their cars; however, many car owners may not know what their policies contain or what they mean when serious car accidents happen.

A type of car insurance coverage many drivers often misunderstand is uninsured/underinsured motorist (UM/UIM) coverage.  The law governing UM/UIM coverage is codified in New Jersey Statutes Annotated Section 17:28-1.1.

It is important to note that in New Jersey, UM/UIM coverage is only offered in a “standard” insurance policy and not in a “basic” insurance policy.

The “standard” policy provides different coverage options and the opportunity to buy additional protection.  Most New Jersey drivers choose the standard policy.

Though the “basic” policy costs significantly less than a “standard” policy, it provides limited coverage and does not offer UM/UIM coverage.

What is UM Coverage?

UM coverage comes into play when the car insurance policy holder or other “insureds” (i.e., household family members) under the car insurance policy are injured in an accident caused by a driver who does not have car insurance to cover their bodily injury losses. It also comes into play in phantom driver or hit and run situations.

For example, driver A was in a serious car accident caused by driver B on the NJ turnpike and sustains serious injuries.  Driver A files a claim against driver B, but driver B is uninsured.  In this instance, driver A can file an UM claim under his own car insurance policy.

What is UIM coverage?

UIM comes into play when the policyholder or other “insureds” under the policy are injured in an accident caused by another driver whose bodily liability coverage is insufficient to compensate the injured insureds.

Using the factual example above, driver A is catastrophically injured and files a claim against driver B.  Driver A’s damages are $200,000; however, driver B’s bodily injury or liability coverage is only $100,000.  Therefore, driver B’s insurance company would pay $100,000 to driver A for his losses.

Because driver A’s losses are over $100,000, he may file a UIM claim under his own car insurance policy to recover the remaining $100,000.  However, driver A’s UIM coverage must be more than driver A’s liability coverage.  Therefore, driver A’s UIM coverage has to be more than $100,000 in order to file a UIM claim.

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