If you have ever elected to purchase uninsured (or underinsured) motorist (UM) coverage with your automobile insurance policy, you were likely asked if you would like to “stack” the coverage. In many instances, after hearing a brief explanation, many insureds answer the question even though they do not fully grasp the concept of stacking coverages. More importantly, many insureds respond without understanding the significance of their decision.

In an effort to eliminate instances of uninformed stacking decisions, Florida law requires that insureds make their election in writing on a form approved by the Office of Insurance Regulation. In addition to protecting an insured’s interests in this regard, the requirement that insurance companies obtain informed consent confirms the significance of the deciding whether or not to stack UM coverage.

The importance of this decision is further highlighted by its connection to UM coverage. UM coverage applies to bodily injuries to you and your passengers when the other person who caused the accident has no insurance or not enough insurance to cover the claim. While always valuable, the need for UM coverage is even more pronounced during difficult economic times since the number of uninsured and underinsured drivers is usually at its highest. Given the high cost of being involved in an accident with an uninsured or underinsured driver, UM coverage is often described as being one of the most important parts of a comprehensive auto insurance program.

Fortunately, the concept of stacking coverage is fairly straightforward. By taking a few moments to understand the difference between stacked and un-stacked (or non-stacked), an insured can evaluate the differences between the two, which will then allow them to determine which option best suits their particular needs.

Although amounts vary depending on an insured’s choice, insurance polices contain coverage limits which are typically expressed as 10/20 ($10,000 per person / $20,000 per accident), 50/100, 100/300, etc. These numbers represent the limit of what an insurance company will pay in the event of a claim.

Those who purchase UM coverage may be given the option to add, or stack, the limits of coverage, thereby increasing the amount that an insurance company will pay in the event of a claim. When an insured elects to stack the coverage, the limits will increase based on the number of cars that are insured.

Consider the example of an insured that has three vehicles insured under the same policy, and each has a UM limit of 50/100 ($50,000 per person/$100,000 per accident). If the insured elects not to stack the coverage, then these UM limits would not change. However, if the insured does elect to stack the coverage, then the insured will have UM coverage of up to $150,000 per person/$300,000 per accident, which is arrived at by multiplying the number of vehicles by the limits of insurance.

As this example illustrates, electing to stack UM coverage limits can make a big difference in the amount of insurance coverage that is available to an insured for a UM claim. Since choosing to stack coverage operates to increase the available limits, it necessarily follows that the choice will result in higher premiums. However, in many instances the increase is reasonable when compared to the additional coverage. Nevertheless, any increase in cost should be considered.

Additionally, in some cases, stacking coverage may increase the likelihood that the UM policy will respond to a claim whereas the un-stacked policy may not. For example, in some instances, an owner of a car and a motorcycle who elects to stack the auto policy may be covered in the event of a motorcycle accident caused by an uninsured motorist. The same may not be true if the auto policy is un-stacked. So, in addition to increased limits, there may also be an increased response by the stacked policy. Consequentially, since stacking may result in coverage that may not otherwise be available if the UM coverage was un-stacked, many people elect to stack their coverage even if they only have one car.

In many, if not most instances, the recommendation will be to stack the UM coverage regardless of any increase in premium. Nevertheless, it would be wise to make an independent evaluation when it comes to this decision. Understanding the difference between stacked and un-stacked, as well as the ramifications of choosing one over the other, gives an insured all that is needed to make a decision that is best for them.

Finally, when it comes to stacking coverage, state laws may vary significantly depending on the wording of any applicable statutes, judicial interpretations, and insurance policies. Therefore, it is wise to either become familiar with your state’s laws, or alternatively, do business with a reputable and experienced insurance agent.

If you would like more information about personal or commercial automobile insurance, including UM coverage, please contact us.