Categorized | Insurance

Uninsured Drivers Can Cost You Money

Have you heard the term “diminution of value?” Even if you have, you may not be aware that many commercial auto policies contain a “diminution of value” exclusion. You should be aware of this exclusion if your company uses rental vehicles. Find out why by reading my new article.

As a small business owner, you know that you are required by state law to insure your autos under an auto liability policy. But did you know that one out of every seven drivers has no insurance? This sad state of affairs is bad for your business because uninsured drivers can cost you money.

If you or an employee is involved in an auto accident in which the other drive is at fault, you may have to rely on your company’s insurance to cover injuries or property damage you or your employee sustained. Even if you have full coverage under your commercial auto policy, you may end up with an uninsured expense. This doesn’t seem fair but that’s how it is.

Leg in cast

I was reminded of the uninsured driver problem a few weeks ago. The driver of an uninsured van lost control of the vehicle and smashed into when my elderly mother’s custom-made fence. We are fortunate that my mom was not in her front yard when the accident occurred. My mom has homeowners insurance, but it may not cover all of the loss. Even if it does my mother will have to pay the deductible out of her pocket.

What can you do to protect your business against auto accidents caused by uninsured drivers? One alternative is to purchase uninsured motorist (UM) coverage. This coverage serves as a backstop in the event you or your passenger is injured in an auto accident, and the at-fault driver has no insurance. A related coverage called underinsured motorist (UIM) coverage is available in some states. It applies when the at-fault driver has some insurance but the limit is insufficient to cover the damages owed to the injured party. In many states you can purchase UM and UIM coverages at the same limit you purchased for liability coverage.

UM is an oddball coverage. It covers third-party liability but pays damages to you (the policyholder) or your injured passenger. It pays the amount of damages you or the passenger would have been able to collect had that driver been properly insured.

One disadvantage of UM and UIM coverages is that they may apply after any available workers compensation benefits have been provided. For example, suppose you are driving a covered auto and are injured in an accident caused by an uninsured driver. If you are covered under both a WC policy and UM coverage, the UM insurer may not pay anything until you have received your WC benefits. Moreover, some states allow the UM insurer take a setoff for any WC benefits you have received. That is, the UM insurer may pay you the difference between the damages owed under UM coverage and the amount of WC benefits you have received.

In some states, uninsured motorist coverage includes property damage. The amount is usually low, such as $3500. It covers damage to a covered auto caused by an uninsured driver. The coverage may be unavailable if you have purchased collision coverage. Alternatively, UMPD may cover just your collision deductible. In some states UMPD itself is subject to a deductible.

Image courtesy of [sippakorn] / FreeDigitalImages.net

Source: About.com
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