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How consumers get cheated by anti-stacking laws

Many consumers think of insurance companies as organizations that take our hard-earned money and then abandon or low-ball us when we need them. Fewer of us realize that in one area of automobile insurance, Underinsured Motorist Coverage, the current state of the law in many states, including Ohio, prohibits insurance consumers from getting the protection for which they have been charged and paid. The law makes it legal for the insurance carriers NOT to give their customers the protection they believed they purchased. In short: We don’t get what we paid for.

Unlike liability coverage mandated by the State, the purchase of Underinsured Motorist Coverage is voluntary. When a motorist buys this benefit, it is to secure financial protection if they are hit by a motorist carrying a very small insurance policy that fails to cover the extent of their injuries. Consumers of this insurance product seek to make sure their medical bills and lost earnings will be compensated and they will not incur their own out of pocket costs because of the fault of another.

The problem is that as the law stands now, insurers have the right to reduce the amount of payable loss. This is referred to as “anti-stacking.” Under the law, insurance companies do not have to provide the full measure of financial protection many consumers believed they were paying for under such policies, but instead they get an offset for the amount paid by the wrongdoer’s insurance.

Consider the following example: You are injured in a car wreck and your medical bills are $125,000. The driver who caused the wreck has only a $25,000 policy. You have purchased $100,000 in Underinsured Motorist Coverage. One would think you would be compensated with the $25,000 from the at-fault driver AND collect the $100,000 dollars from the policy you purchased. Wrong! In this case, the insurance company gets a $25,000 “credit” for the amount paid by the other driver. It only has to provide you with $75,000 for your bills. You come up $25,000 light.

The scenario can be even worse if your Underinsured Motorist Coverage limits match the at-fault driver’s liability limits. Consider this application of the law: as a result of an accident you have medical bills of $200,000. The person who caused the wreck has a $100,000 policy. Your policy provides for $100,000 in underinsured coverage. Because both parties to this accident have equal policy limits of $100,000, your insurer does not have to pay anything. The total payout by your carrier is zero and you owe $100,000 in medical bills. You get absolutely no benefit from a policy for which you paid good money.

How can consumers get around this law until it changes? We often advise clients that they should maintain ample Underinsured Motorist Coverage limits because of the number of at-fault drivers who do not carry enough insurance. As long as your limits EXCEED the wrong-doer’s limits, you could be entitled to the extra coverage. Remember that Underinsured Motorist Coverage is probably the most important insurance you can buy to protect yourself in the event you are seriously injured in an accident through no fault of your own.

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