But I Paid for $1M of UIM Coverage!

Times change.

I used to have clients tell me that they couldn’t settle for $X because it wasn’t enough to pay off their truck or $Y because it wasn’t enough to pay off their house.

But I haven’t heard either of those in over a decade. (Maybe I’m better now at explaining that retiring debt is super-important, but whether to settle claims needs to be evaluated based on what we’re likely to get at trial, not how much is owed to lenders.)

What I do hear frequently is: I paid for $X of underinsurance motorist coverage and I’m not going to take a penny less. (Or some variation of that pronouncement.)

This is the explanation I give:

If you purchase a $1M life insurance policy and die, your beneficiary is entitled to $1M (baring any exclusions like suicide).

But purchasing $1M in UM/UIM coverage doesn’t mean that you’re entitled to $1M. What it means is that you’ve purchased that as a “ceiling” on the benefits that will be paid if you’re injured by someone without insurance or without enough insurance.

That’s the most that will be paid. If you have a claim that’s worth $20M, the most your insurance company will pay is $1M.

And it does not mean that irrespective of injury you’re entitled to $1M. It means that you’re entitled to up to $1M in benefits. If your claim is worth $47,000, that’s the amount to which you’re entitled (and you may have to try or arbitrate your case to extract that from your insurance company).

Not everyone is happy with that explanation. But the sooner you understand what’s happening, the sooner you’re able to adjust and re-set expectations.