How many people do you know who have been injured in an auto accident to the extent their long-term income has been negatively affected? In Michigan, you’re required to buy automobile liability insurance to protect others if you screw up and seriously hurt someone seriously. Because it’s required, you cannot legally avoid the cost of that coverage although other optional auto related protection is available at an additional cost.

Despite Michigan’s no-fault law, any long-term protection of my earnings if I become disabled to the extent I cannot work, comes from liability coverage. Michigan law only requires each driver to buy at least $20,000 per person/ $40,000 per accident of Public Liability coverage should they be found responsible to compensate a seriously injured person. Those with significant assets to protect often buy hundreds of thousands, if not millions of dollars in liability coverage. Most do not.

A vast majority in Michigan, estimated at as much as 77%, purchase the required minimum, while approximately 11% ignore the law completely and drive uninsured. A small minority buy coverage with limits in excess of the required 20/40. Simple math establishes the probability of collecting anything from the at fault driver in excess of $20,000 if you are seriously injured, based upon the limits most Michigan drivers purchase, at about 1 in 9.

Think of the risk this way; I become permanently disabled in a car wreck. It was a drunk drivers fault. I work hard but only take home $25,000 per year. I sue the other driver to replace my wage loss after the three years of no-fault wage benefits[1] expire.

If I could not work at all, (and ignoring all of my family’s other expenses such as heat, food, transportation and clothing), a recovery of $20,000 would only make my house payment for 18 months. Recognizing that as a problem, what should I do?

As a Saginaw Attorney, I would suggest very affordable, optional coverage for Uninsured Motorist (UM) and Underinsured Motorist (UIM). Although some insurers limit the dollar amount they will sell you, other insurers don’t offer underinsurance at all.

UM coverage protects you if the at-fault driver has no insurance. UIM protection obligates your insurance company to pay the difference between the amount you purchase from them (say $500,000) and the $20,000 coverage most of the people on the road carry. In the drunk driver example, I would sue the driver, collect his $20,000 in Public Liability coverage and then collect $480,000 from my own insurance carrier which would enable me to pay my family’s house payment for 36 1/2 years.

While most insurance companies limit the amount of UM/UIM coverage they will sell to you, the amount of Public Liability coverage you purchase with the combined cost of purchasing the larger amount of UM/UI M and public liability usually is a relatively small percentage of overall car insurance expense. This type of extra coverage is typically no more than 8% to 14% per year. My actual cost for $500,000 limits is approximately $220 additional per year for three vehicles.

You do not need to be a business attorney to know that long-term disability insurance premiums can increases each year and vary significantly with age. Generally, UM/UIM premiums do not. When you consider the present and future cost of long-term disability insurance, the value of adequate UM/UIM coverage as a partial alternative to disability insurance becomes clear.

[1] Subject of future installment