Uninsured Motorist Coverage: Added-On vs. Reduced

 

Georgia’s drivers have two options when it comes to the Uninsured Motorist (UM) coverage on their auto insurance.  The first is called New Uninsured Motorist Coverage and is referred to as “Added-On” by many insurers.  Under this coverage, your Uninsured Motorist coverage is “added on” to any at-fault liability coverage the other driver has.

The second is called Traditional Uninsured Motorist Coverage and is referred to as “Reduced” by many insurers.  This means that your Uninsured Motorist coverage is “reduced” by any at-fault liability coverage the other driver has.  This option provides less coverage in the event that you are involved in an accident, caused by another driver that doesn’t have enough insurance. 

For example:

Let’s say that you are driving through an intersection when another driver runs the red light and hits your car.  You and your passenger are hurt badly in the accident and your car is totaled.  As it turns out, the medical bills for you and your passenger amount to $125,000.  Your car at the time of the accident was worth $32,000.

Thankfully, the driver that hit you has insurance, although it is only the state minimums.  That is, he has Bodily Injury coverage at $25,000 per person, $50,000 per accident and $25,000 for property damage (many times referred to as 25/50/25).  He rents an apartment, has no real assets, and he struggles to keep a minimum wage job.  The judge decides that he is entirely at fault and that he is responsible for your damages.  In reality, after his insurance pays you his policy limits, you won’t be able to collect much more in damages from this driver.  This is where your Uninsured Motorist coverage kicks in.

You have Uninsured Motorist coverage of Bodily Injury at $50,000 per person, $100,000 per accident, and $25,000 for property damage.  You have a $250 deductible on property damage.  Below is what the payment situations will be under each Uninsured Motorist option.

 

 

Bodily Injury - $125,000

Uninsured Motorist Reduced

 

Your Limit is Reduced by His

$100,000 - $50,000 = $50,000

($100,000 Total)

Uuinsured Motorist Added-On

 

Your Limit is added to His

$100,000 + $50,000 = $150,000

($150,000 Total)

His Insurance Pays

Limit - $50,000

 

$50,000

 

$50,000

 

Your Insurance Pays

 

$50,000

 

$75,000

 

Total Paid

 

$100,000

 

$125,000

Medical Bills You Pay

$25,000

$0

 

 

Property Damage - $32,000

Uninsured Motorist Reduced

 

Your Limit is Reduced by His

$25,000 - $25,000 = $0

($25,000 Total)

Uninsured Motorist
Added-On

 

Your Limit is added to His

$25,000 + $25,000 = $50,000

($50,000 Total)

His Insurance Pays

Limit - $25,000

 

$25,000

 

$25,000

 

Your Insurance Pays

 

$0

 

$6,750

 

Total Paid

 

$25,000

 

$31,750

Property Damage
You Pay

$7,000

            $250 Deductible

 

One last note - In the case where the other driver has no insurance at all, both options will pay for your injuries and property damage up to your Uninsured Motorist limits.  There is no difference in coverage.

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