Understanding Multiple UM/UIM Policies

California uninsured and underinsured motorist coverage is deceptive. There is a good chance even your insurance agent doesn’t clearly understand how it works. And you almost certainly need more of it than you currently have.

The reason? Your UM/UIM insurance coverage is “non-stacking” — in other words, it only gives you coverage up to a combined total maximum benefit of your policy limit.

A rational person would expect that having $30,000 in UM coverage would mean you have an additional $30K, after you’ve used up the other driver’s policy limits (this is called “stacking”). But that’s not the case. Instead, your insurance is allowed to deduct the other driver’s policy limits before they pay you anything.

How does this work in real life?

Let’s say you get into a crash. The other driver has a $15,000 policy limit. You have $30,000 in UIM. You would expect this to mean you have a combined total of $45,000 available.

But in reality, you have much less. You get $15,000 from the other driver, and then your insurance deducts that amount from your policy. So you have no more than $15,000 available from your own insurance.

Your grand total: the UIM policy limits of $30,000.

Tricky? Yes. Deceptive? Absolutely. Legal? Unfortunately.

How to protect yourself? Get more insurance.

As much as it pains me to recommend giving money to insurance companies, the best way to protect your family is to have as much UM/UIM coverage as you can afford. You need at least as much as your liability limits.

If there is any area of your coverage to not skimp on, this is it.

Unfortunately, this same “non-stacking” rule applies even when there are multiple UM/UIM policies — with some additional quirks.

Let’s use an example.

You were the passenger in a crash caused by an uninsured driver. The driver of your car has a $30,000 UM policy. You also have a $15,000 UM policy on your own auto insurance.

A rational person would expect that the total insurance money would be the sum of the two policies — in other words, that your $15,000 and their $30,000 policy would equal $45,000 in total coverage (this is “stacking”).
But under the “non-stacking” rule, the largest policy sets the total coverage limits. In other words, you can’t get more than $30,000.

Now you’re asking: But what about my policy? Is that $15,000 just wasted? Unfortunately, in this particular case, it’s not going to do you any good. But the insurance companies are glad for it.

What happens is that the two insurance companies, combined, only have to pay up to the largest policy limits of $30,000. But each company only has to pay a pro rata portion, based on the size of their policy limits.

In this case, the driver’s UM coverage is twice as large as yours. That means their insurance would be exposed to pay twice as much of the policy limits as yours. So the driver’s policy pays $20,000, and your policy pays $10,000, and the total is a frustrating $30,000.

Of course, for a non-policy-limits case, there’s no requirement that Company X pay exactly twice as much as Company Y. So it can be a real headache to deal with this situation. If the adjusters aren’t coordinating between themselves, sometimes you can divide-and-conquer and get a better outcome. But there’s no guarantees.

Still, even though UM/UIM is not as effective as it should be, it is the most important coverage you can buy to protect your family. After all, if your driver didn’t have any coverage, you’d be extremely grateful for your $15,000.

But it’s still best to have as much UM/UIM as you can afford.

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