You may have paid a fraction of the cost that your neighbor paid for his auto policy, but how much of your medical bills would this “great bargain” policy cover you if you were involved in a car accident today?

As personal injury attorneys, we often work with people after they suffered injuries in an auto accident in Minnesota. Sometimes, our clients must turn to their own auto insurance policy because the at-fault driver didn’t carry adequate coverage or wasn’t insured. In those situations, our clients must pursue an uninsured or underinsured motorist insurance claim against his or her own policy.

Understanding the various auto insurance options in Minnesota is something most drivers put off until it is too late. While taking the time to learn what phrases such as UM, UIM and PIP mean may sound dull, being prepared now can mean saving thousands of dollars in out-of-pocket costs in an auto accident later.

The Basics of PIP Coverage

The State of Minnesota is a “no fault” state. This means Minnesota drivers generally must maintain basic economic loss and automobile liability coverage on their vehicles known as Personal Injury Protection (PIP). Your insurance company covers PIP coverage to pay your out-of-pocket expenses, regardless of who caused the accident. Specifically, Minnesota requires your PIP plan to cover at a minimum $20,000 in medical costs and $20,000 in wage loss and replacement services. Note: These benefits usually do not apply to accidents that occur while you are driving a motorcycle or snowmobile!

Covering All Your Bases: What Happens When the PIP Well Dries Up

If, like in many car accidents, your expenses exceed your PIP coverage, the at-fault driver is responsible for damages. These include things such as medical losses, pain, emotional distress, disability and loss of future earnings. So, if you didn’t cause the accident, you may make a claim against the other driver’s liability coverage. If the at-fault driver is not insured or his liability insurance is not enough to pay for your losses, you may seek additional coverage from your own insurance policy’s uninsured motorist (UM) or underinsured motorist (UIM) provisions.

• Liability coverage:  The purpose of liability coverage is to cover you in the event that you caused an accident that injured someone else or damaged someone else’s vehicle. Minnesota requires you to have a minimum of $30,000 for injuries to one person and $60,000 for injuries to two or more people. While these figures may appear sufficient, consider that some auto accidents can result in hundreds of thousands of dollars, and potentially millions in damages. As a result, failing to purchase an adequate policy can leave you exposed for another person’s injuries.

• Uninsured (UM): Although every car driven in the streets of Minnesota must have car insurance, the sad truth is that many do not. For this reason, your auto insurance policy contains an uninsured provision (UM). Minnesota requires that the minimum UM coverage offers $25,000 for injuries to one person and $50,000 for injuries to two or more people.  The UM provision applies to your medical expenses only after you have used up your PIP benefits and if the at-fault driver is not covered by insurance. Failing to purchase enough uninsured coverage can leave you significantly undercompensated for your injuries and losses.

• Underinsured (UIM): As noted above, Minnesota law requires only a threshold minimum of $30,000 in liability coverage for injuries to one person.  With the costs of healthcare services being what they are today, that minimum coverage may not be sufficient to compensate you even in the event of a moderate- to high-impact accident. As a result, Minnesota also requires all licensed vehicles to have a minimum of $25,000 for injuries to one person in underinsured coverage (UIM). UIM pays within your policy’s stated limits for medical claims and are in addition to your PIP benefits. The UIM provision applies when you are not the at-fault driver and the at-fault driver does not have enough liability coverage to cover your medical claims.

Recommended Coverage Limits for Minnesota Drivers

While auto insurance is designed to protect you by providing different types of required minimum coverage, having the bare-bone minimum coverage is often not enough. As personal injury lawyers in Minnesota, we recommend to many of our clients that they obtain a policy with a minimum of $300,000 in liability coverage and $300,000 in Underinsured and Uninsured coverage. This may not seem the most economical in the short term, but you certainly won’t regret your decision in the event of an accident. Definitely feel free to reach out to us if you would like help determining what policy limits make the most sense in your situation.

Seeing the Light at the End of the Tunnel

The description of auto insurance policies listed above is really only hitting the tip of the iceberg when it comes to types of coverage, limits and potential damages.  Hopefully this helped you understand the basics, and why buying a cut-rate insurance policy likely isn’t the most beneficial for you.

If you have questions, or if you feel there are other considerations here that we haven’t hit on here, we encourage you to leave a comment below.

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