Sometimes it pays to listen to the lawyers.
So here's what the personal injury lawyers tell their friends,
and clients, and family and neighbors: Get your little driving
gloves on as much uninsured motorist coverage as you can.
If you don't have
uninsured motorist coverage
(UM) on your auto insurance policy, buy it, they say. If you have
it, jack that coverage up. Raise it by 5- or even 10-fold, say
lawyers. The cost is minimal, the potential payoff huge.
"The little secret of auto insurance is that uninsured motorist
coverage is very cheap," said Chuck Geerhart, a San Francisco trial
lawyer who carries $1 million in uninsured motorist coverage. "The
most expensive part of insurance is the first $15,000." Adding
injury limits to $500,000 is "not more than $100 a year."
Why the urgency?
Nationally, an estimated 1 in 7 drivers is uninsured. That's
29.4 million people wielding two-ton weapons on public roadways,
without a way to pay for the damages they cause. In some areas, the
percentage is much, much higher. (See "
Can you legally drive without car insurance?
")
But forget the numbers. A better spur to protecting yourself is
to understand exactly
why
there are so many uninsured drivers out there, and why their
numbers are not likely to drop anytime soon.
Consumers are rational actors
It's tempting -- and understandable -- to curse uninsured
drivers as inconsiderate scofflaws.
The scofflaw part is certainly true:
Every state
requires some kind of financial responsibility that pays the
victim's damages. It is also unethical, most would agree, to put
other people at such high risk.
But uninsured drivers may be making a simple cost-benefit
analysis where the bottom line is: It's not worth it.
A
calculation by CarInsurance.com
found that in some cities a 24-year-old male with no traffic
tickets and a good credit score would have to work more than a
month at a minimum-wage job to afford the minimum level of required
auto insurance coverage.
These young workers are hardly alone. Half of American workers
now earn less than $26,000 a year; nearly a quarter of jobs pay
below the federal poverty level for a family of four -- $22,000 a
year. In a 2011 Gallup poll, nearly 20 percent of Americans said
they had trouble putting food on the table sometime in the past 12
months.
Meanwhile, the nonprofit Consumer Federation of America (CFA)
estimates that the average cost of the minimum level of liability
coverage for low- and moderate-income car owners is $823.
Do the math, and millions of Americans really are faced with the
worst of decisions: Car insurance or rent? Car insurance or
food?
When push comes to shove
"If it was me, I'd rather eat than have a piece of paper that
says I'm insured," says Bob Hunter, director of insurance for the
CFA. "It's just silly to assume that these people can even afford
it. What is the economic value to that person anyway, spending 10
percent of his income on car insurance?"
When CFA survey respondents were asked whether they knew an
uninsured motorist, 22 percent of those with incomes between
$25,000 and $50,000 said they did. Eight in 10 said those uninsured
drivers needed a car but couldn't afford the insurance.
One unemployed college graduate, writing about her experience
for the Gawker.com story "Hello from the underclass: unemployment
stories, Vol. One," described how a friend had accused her of being
unwilling to apply for a job at Target.
"HA. Until recently, we couldn't even afford the insurance for
me to have a license to get to Target, and since I live in the
'burbs, there is no public transportation around me to speak of,"
the woman wrote. "When you can't even afford to get to the local
Target, how can you be expected to snap up a job?"
The end result is that millions of people decide to take the
risk.
Little risk, little benefit
"They're making wise economic decisions," says Hunter, a former
Texas insurance commissioner. "They're judgment-proof anyway."
The person at fault in a car accident is legally required to pay
damages, whether he has insurance or not. But if he can't pay, he
can't pay. Few lawyers are going to invest the time to go after
someone who doesn't have recoverable assets.
"As a personal injury lawyer, I have no interest in you," said
Geerhart. "I'm not going to sue you, I'm not going to pursue you.
You can't get blood out of a turnip."
On the criminal level, uninsured drivers do face fines, and they
can lose their licenses. Many continue to drive anyway. In a
handful of states, repeat offenders can even be thrown in jail, but
in practice that rarely, if ever, happens.
Others eventually may wind up buying liability insurance, but
even that is no guarantee that the people they hit will be fully
covered -- or even close to it. State required minimums may be as
low as $15,000 per injured person, and as low as $5,000 for
property damage.
Protect yourself from the uninsured
"$5,000 won't fix much," says CarInsurance.com consumer analyst
Penny Gusner.
Typically, uninsured motorist and underinsured motorist coverage
is sold in amounts that mirror your own liability coverage. That
is, if you have bought $15,000 per person bodily injury liability
coverage for yourself, then the maximum amount of uninsured
motorist bodily injury coverage you can buy is $15,000.
Gusner suggests uninsured motorist bodily liability limits of
$100,000 per person and $300,000 per accident, the same limits she
recommends for bodily injury liability coverage.
To illustrate the costs involved, we compared insurance rates
for a 40-year-old male with an unblemished driving record owning a
2012 Honda Accord in Marietta, Ga. The policy includes
comprehensive and collision coverage, but we compared varying
limits for liability and uninsured motorist.
- For $25,000/$50,000/$25,000 liability coverages, but no
uninsured/underinsured motorist coverage, the cheapest quote was
$1,115 a year.
- Adding uninsured/underinsured motorist with coverage of
$25,000/$50,000/$25,000 brought the least expensive quote to
$1,225 a year.
- Bringing the owner's liability coverage up to
$100,000/$300,000/$50,000 and matching those levels on
uninsured/underinsured motorist, the cheapest quote was $1,274 a
year.
Of course, rules vary by state. Many cap the amount of uninsured
motorist property damage at a very low amount, Gusner says, meaning
you might have to turn to your own collision coverage to get your
car fixed.
And your own health insurance needs to enter the picture as
well. Knowing what your health insurance company will and won't
cover will help you determine what UM/UIM limits you should
carry.