What Is Stacked vs. Unstacked Uninsured Motorist Coverage?
Understand how your auto insurance limits for uninsured incidents are calculated and the financial implications of your policy structure.
Auto insurance policies provide financial protection against unexpected events on the road. Understanding the specific components of a policy helps individuals make informed decisions about their coverage. This article clarifies important aspects of uninsured motorist coverage, offering insights into different options available to policyholders.
Understanding Uninsured and Underinsured Motorist Coverage
Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage protect individuals and their passengers in an accident with a driver who lacks sufficient insurance. UM coverage applies when the at-fault driver has no auto insurance or in hit-and-run incidents. UIM coverage applies when the at-fault driver has some insurance, but their policy limits are insufficient to cover damages or injuries.
These coverages can include medical expenses for injuries, such as doctor bills, hospital visits, and rehabilitation. They may also compensate for lost wages if injuries prevent work, and for pain and suffering. Some policies may include property damage coverage for your vehicle, though this varies by state and policy terms.
What is Unstacked Uninsured Motorist Coverage
Unstacked uninsured motorist coverage means the coverage limits apply individually to each vehicle on a policy and cannot be combined. Even if multiple vehicles are insured under the same policy, their individual UM/UIM limits do not aggregate.
For instance, if a policyholder has two vehicles on a single policy, each with unstacked uninsured motorist bodily injury (UMBI) coverage of $50,000 per person and $100,000 per accident, the maximum payout for an incident involving one vehicle would be $50,000 per person, up to $100,000 per accident. The coverage from the second vehicle cannot be added. This option is often the default and results in lower premiums compared to stacked coverage, as the insurer’s maximum exposure per claim is fixed and lower.
What is Stacked Uninsured Motorist Coverage
Stacked uninsured motorist coverage allows policyholders to combine the coverage limits from multiple vehicles. This can occur in two ways: “intra-policy stacking,” combining limits for multiple vehicles on a single policy, or “inter-policy stacking,” combining limits from multiple separate policies. Stacking coverage can significantly increase the total protection available in an accident with an uninsured or underinsured driver.
For example, if an individual has two vehicles on the same policy, each with $50,000 in uninsured motorist bodily injury (UMBI) coverage, stacking these limits could provide $100,000 in total coverage. If they had three vehicles, coverage could reach $150,000. Similarly, if an individual has two separate policies, each with $25,000 UMBI limits, and inter-policy stacking is permitted, the combined coverage could be $50,000. While offering greater financial protection, stacked coverage results in higher premiums due to the increased potential payout from the insurer.
Key Differences and Policy Implications
The distinction between stacked and unstacked uninsured motorist coverage lies in how limits are calculated and applied after an accident. Unstacked coverage maintains separate limits for each vehicle, capping the payout at the individual vehicle’s limit. This can lead to higher out-of-pocket expenses if damages exceed the unstacked limit, particularly in severe accidents.
In contrast, stacked coverage allows for the aggregation of limits from multiple vehicles or policies, providing a larger pool of funds for expenses like medical bills, lost wages, and pain and suffering. This increased coverage offers more comprehensive financial protection, especially for substantial injuries. The choice between these options impacts a policyholder’s financial security after an incident. While stacked coverage offers enhanced protection, it comes with a higher premium, reflecting increased risk for the insurance company. The availability of stacking provisions and rules varies by state.