The Mysteries of SUM/UM Coverage Explained

Shhhhhhh!! I know it’s a dirty little secret, but you’ll be happy to learn that almost everyone is guilty of it. When was the last time you actually reviewed or paid attention to your motor vehicle insurance coverage? Do you really know or understand what your policy provides for in the event of an accident? If you’re like most people, I suspect the answers to those respective questions are rarely, if ever, and nope, not really. About the only thing that most drivers care about is making sure they have the necessary insurance coverage to ensure their right to operate their motor vehicle (at least as mandated by the State of New York).

If ever an accident were to occur in which you were seriously injured at the hands of a driver who either didn’t have any insurance coverage or minimal policy limits, your own interests could be seriously jeopardized. It’s for this reason that I’m urging every one of you to grab the declarations page from your insurance policy and give it a quick perusal… go on… right now, go grab it…. Don’t worry, I’ll wait…

Now, assuming you’ve done your homework and have in fact reviewed your policy limits, I’ll draw your attention to a couple lines on your policy that you’ve probably never paid attention to or that you may not have fully understood. I’m referring to the coverage line pertaining to SUM/UM coverage. Although it may have a funny and acronym ridden name, this coverage line is second only to your liability limits in terms of importance in your policy.

As for what are they and what do they mean, SUM stands for Supplemental Underinsured Motorist coverage, while UM stands for Uninsured Motorist coverage. In New York State, drivers are required to carry a minimum of $25,000 in liability coverage for a single person and $50,000 in liability coverage for multiple claims. This is different than SUM/UM coverage. Liability coverage protects other individuals against your negligence in the event you cause an accident with resulting injuries. All in all, the statutory minimum $25,000/$50,000 policy is by all measures small potatoes and won’t provide much coverage. That’s where SUM/UM coverage come into play.

Heaven forbid it ever happens, but consider this. What happens if you’re involved in a serious or catastrophic motor vehicle accident caused solely by the negligence of another. Chances are pretty good that you or your family may be entitled to damages against the driver of the other vehicle. Now imagine that the driver of the other vehicle either has no coverage or only the statutory state minimum? What happens then, when that $25,000/$50,000 policy isn’t enough to make you or your family whole? Do you call it a day, and walk away once her policy gets tendered? Or do you try to chase down the negligent party for the damages you’ve suffered which exceed her policy limits?

Both are certainly viable options, but the issue of practicality often comes into play. From the standpoint of professional experience, I’ve often found that those who maintain only minimal policy limits likely won’t have assets sufficient to satisfy even a potential judgment. Is that an absolute statement or even a bar to chasing tortfeasors for their negligence? Of course not, but it is a warning that you should never rely on another party’s ability to make you whole.

With that lesson in mind, I turn back to the concepts of SUM and UM coverage. These, in essence, are policy riders intended to protect you and your household relatives against the unexpected exposure resulting from the negligence of others. Where a negligent driver either has no coverage or insufficient coverage to make an injured party’s damages whole, UM and SUM riders kick in to fill in the gaps, respectively. The riders work just as their names imply. SUM coverage applies to situations where a driver has insufficient coverage, while UM coverage applies to situations where the other driver has no coverage.

What’s important to understand about both SUM and UM riders is that you are buying coverage up to a particular dollar value, but that may not be the amount you get. Any coverage offered by a SUM/UM rider will first be offset by any amounts you receive from the other party’s insurance policy. Take for example the following hypothetical. Assume you are involved in an accident with an individual that only carries a $25,000 liability policy which fully pays out to you. Assume also that you carry a $100,000 SUM rider. The most you could ever hope to recover against your SUM rider is $75,000 because the $25,000 will get deducted against the total amount available under the rider.
The down side to the system is that you don’t get the full $100,000 on top of the $25,000 you received from the negligent driver’s carrier. The up side, however, is that your little bit of planning has provided you with an extra $75,000 in potential coverage to which you wouldn’t otherwise have had access.

At the end of the day, the moral to this story should be simple: risk exposure is everywhere, so do what you can to minimize it, especially if you have a family. In the world of motor vehicle accidents, the statistics suggest that a collision occurs about every 8 seconds in the United States. While the majority of these accidents are certainly minor, a portion of them will nonetheless result in serious injuries and death. If you ever fall into one of these latter categories, do you really want to bank on the other driver having adequate coverage to protect your interests? I suspect not.

On a final note, I would remind everyone that even if you have high liability limits on your policy, that doesn’t necessarily mean you have any or adequate SUM/UM coverage. It’s for this reason that I encourage everyone to review their insurance policies. Not only should you understand what your coverage limits are, you need to make sure that you have adequate limits in place to protect against the unknown. If you’re unsure, speak with your attorney or insurance agent to determine what makes sense for you.