Last year the Insurance Research Council (IRC) confirmed what common sense dictates: the higher the unemployment rate, the more driver’s there are on the roads without auto insurance. Studies have shown that when drivers have regular employment and income, they will purchase insurance. In today’s tough economy many can no longer afford auto insurance, yet they continue driving. Frightening, isn’t it?
The link between income and uninsured drivers is clear.
- Nearly one third of 18-24 year olds – the lowest income level demographically–are uninsured
- Nearly a third of households with incomes less than $25,000 do not carry auto insurance
- It is now estimated that nationwide, nearly one in six drivers lacks insurance
- In six states more than 20% of the drivers lack insurance. Mississippi tops the list of uninsured drivers with a whopping 28%
- Nationwide the average percentage of drivers without auto insurance hovers around 16%
What is the solution to this growing problem?
Legally, the problem has been addressed by states requiring that drivers have auto insurance or face stiff penalties and fines. All but three states have some form of compulsory auto insurance requirement, meaning that by law drivers must carry insurance on their vehicle. Law dictates that drivers carry a minimum of liability insurance to cover bodily injury and damages to property when you are at fault in an accident. In Massachusetts owners are required to provide proof of that insurance prior to registering their vehicle, which seems to be effective; Massachusetts has the lowest uninsured motorist rate nationally at 4.5%.
Is state mandated compulsory insurance adequate?
Since states are allowed to set their own minimums, many states have terribly inadequate requirements. Florida, for example, has set minimum coverage limits at 10/20/10. This means that the policy will cover $10,000 for bodily injury per passenger with a $20,000 total payout limit and a $10,000 limit on property damage. If you’ve ever been in a serious accident you know that $10,000 may be just enough to cover your emergency room visit and imaging, much less ongoing treatment or surgery. In addition, most new cars today cost well over $10,000, leaving the driver to pick up the remainder of the property damages. Other states have much higher minimums that may be adequate. Maine and Alaska both have limits of 50/100/25, which is enough to cover the majority of claims.
Insurance companies respond.
Still many drivers simply cannot afford or refuse to comply with state compulsory auto insurance laws. To address this reality, most insurance companies have responded by offering Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage for their clients. This type of coverage will cover you and your passengers if a driver who does not have any insurance or who has inadequate coverage hits you.
In these increasingly difficult economic times, more and more drivers are choosing not to insure their vehicles. Others are losing their auto insurance due to excessively high premiums after having been in an accident. Companies increase rates by 20% to 40% after a single accident, and usually suspend any discounts. This can result in rates tripling which may price some drivers entirely out of coverage. Whatever the reasons, if you wish to protect yourself from the rising numbers of uninsured drivers, talk to your agent about adding UM or UIM coverage to your policy. Also find out what the liability limits are on your policy and consider increasing them if you live in a state with low minimums. For drivers in good standing, the premium increase is usually reasonable and peace of mind is priceless.