Uninsured and Underinsured Motorists Coverage – Does Your Business Need It?

In some states, one in four drivers do not carry auto insurance. And although most states require motorists to have it, some allow coverage limits as low as $5,000! Certain states even allow drivers to be completely uninsured provided they pay a fee to the DMV. Shocking. This does not release the other party from liability, but the chance of such drivers having the means to personally pay for damages is not good.

Top States for Uninsured Motorists

These figures do not include underinsured drivers. This means that if you are in an accident not your fault, there is a significant chance the other driver isn’t covered at all or they have inadequate insurance. The next time you are behind the wheel, count the vehicles you see and consider that every fourth one may be completely uninsured.

What Is at Risk?

As a business owner, consider the cost of your company vehicles. The average price of a new full-sized pickup topped $51,000 in 2019 according to Work Truck Magazine. New semi-trucks can start around $80,000 and go up to $200,000 or more. Chances are many drivers on the road do not carry enough coverage to pay for these expensive vehicles.

Uninsured and Underinsured Motorists Coverage

Uninsured and underinsured coverages are noted separately on a business’s auto policy. In an accident caused by a driver without adequate insurance, these coverages compensate the affected business, up to their own policy limits. In its basic form, your own business auto policy pays for your injuries and/or vehicle damages, even though the accident was not your fault.

These coverages vary by state, so be certain to read your policy and ask your agent regarding any uncertainties. Depending upon your jurisdiction, these coverages may include bodily injury as well as physical damage to the affected vehicle, or they could be bodily-injury only. Again, ask your agent.

A Common Misconception

Business owners often carry uninsured and/or underinsured motorists coverage, but reduce the limits down to the price of their most costly vehicle to save money. In doing so, their strategy is to be made whole on the vehicle but depend upon workers compensation to pay for injury to their own driver. However, such a strategy does not cover every scenario. Consider everyone who drives your company vehicles. For example, businesses often own personal passenger vehicles that are occasionally driven by non-employees. Also, depending upon state law and the circumstances of the accident, employee drivers are occasionally denied workers compensation even though they were driving a business automobile. In either case, injury to such drivers would not be covered.

And since business owners usually also have a personal auto policy, a common reason for declining uninsured or underinsured coverage there is that the family has health coverage. However, health insurance does not pay for lost wages or compensate for pain and suffering.

The SparkNotes

If involved in an accident, the risk is significant that the offending driver may have inadequate coverage or none at all. Uninsured and/or underinsured motorists coverage, on both business and personal auto policies, is a remedy and a coverage we highly recommended.

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