Wisconsin’s laws governing auto insurance, particularly underinsured motorist coverage, changed significantly in recent years. Most drivers are aware of changes that increased minimum liability limits to $50,000 per person and $100,000 per accident in 2009 and later returned minimum liability limits to pre-2009 levels of $25,000 per person and $50,000 per accident in 2011. However, many drivers are not aware of how the law has changed regarding underinsured motorist coverage (UIM) and uninsured motorist coverage (UM). Without understanding these changes, drivers run the risk of providing more protection for others than for themselves and their own family.

When it comes to protecting yourself and your family from damages in auto accidents, it is just as important to have adequate UIM and UM coverage as it is to have appropriate liability coverage. UIM and UM coverage is designed to protect individuals injured in car accidents when the at-fault driver either does not have enough coverage to pay for the damages (UIM) or is uninsured (UM).

Since auto liability insurance is now mandatory in Wisconsin there are likely fewer uninsured motorists, but more insured motorists likely carry the minimum liability limits. Those limits can be exhausted quickly, even in minor impact cases, due to rising health care costs. If serious injuries are involved, or if the injured person’s ability to work or quality of life is impacted, damages could easily exceed the at-fault party’s liability limits. UIM benefits may be available to the injured party, but that coverage depends on the terms of the insurance policy. Insurance companies are required to make a one-time offer of UIM coverage, with minimum coverage of $50,000 per person and $100,000 per accident. UIM coverage is not mandated by law.

When purchasing UIM coverage, pay close attention to the language of the policy. The amount of UIM coverage shown on the declarations page of the policy does not mean what most people think it means. UIM coverage is only available if the accident involves an “underinsured motorist” as defined by the policy. Nearly all policies define an “underinsured motorist” as someone whose liability coverage limits are less than the injured party’s UIM limits. If your UIM limits are the same as or less than the liability limits of the at-fault driver, no UIM benefits are available. Also, Wisconsin law now allows for reducing clauses. Reducing clauses are policy terms that permit the insurer to subtract amounts paid by the other driver’s insurance company or other sources from the injured person’s UIM limits. Reducing clauses can significantly impact the UIM benefits available to an injured person.

Here’s an example to illustrate how UIM coverage works. Say Driver A and Driver B are involved in an accident and Driver B is at fault. Driver A has UIM coverage with limits of $100,000 per person. Driver B has liability coverage with limits of $50,000 per person. If Driver A is injured and recovers the entire $50,000 limit from Driver B’s insurance company, the UIM coverage available to Driver A is $50,000. If Driver A’s insurance also paid him $10,000 in benefits under his policy’s medical payments coverage, then only $40,000 would be available in UIM benefits. What looked to be $100,000 in UIM coverage on the declaration page turned out to be just $40,000 in available UIM benefits to Driver A.

UIM coverage is inexpensive, but the cost of having inadequate UIM coverage is substantial. Wisconsin drivers should check the terms of their auto policies and confirm that they have adequate UIM coverage.