Uninsured/Underinsured Motorist (UM/UIM) coverage can help pay for injuries when another driver causes a crash but has no insurance, or not enough insurance, to cover the harm.
For nonprofits, UM/UIM coverage can help protect your people and vehicles after a crash, and in many cases, it may also be required by law.
A nonprofit’s board or leadership team may see higher UM/UIM limits as the safest choice because the policy would offer a larger maximum payout.
Higher UM/UIM limits can provide more protection, but they also increase the amount your own policy could pay after a serious crash.
Even if your organization was not responsible, a severe crash can get expensive quickly if you have high UM/UIM limits. A large claim on your insurance record is still a large claim.
A major claim can lead to higher renewal costs or coverage that becomes harder to keep affordable.
Nonprofits often consider those risks, along with applicable legal requirements, when choosing UM/UIM limits.
This article explains what UM/UIM covers and how nonprofits can think about coverage choices in light of the financial and legal implications.
Why this matters for small nonprofits: One UM/UIM auto injury claim with high limits can affect your claims history and make affordable coverage harder to secure. Thoughtful coverage decisions also make it easier to explain the organization’s position to the people involved.
In Plain Language: What is Uninsured Motorist/Underinsured Motorist Coverage?
UM/UIM coverage applies when another driver is at fault for a vehicle crash and has no liability insurance or too little liability insurance to cover the loss.
It can help pay for injuries to people in a covered auto when the other at-fault driver cannot cover the full loss. UM/UIM benefits are not limited to only serious injuries.
In underinsured motorist claims, coverage generally applies after the injured party settles the liability claim against the at-fault driver for the full available policy limits.
UM/UIM coverage generally applies to covered autos under the policy. It is generally not the intent of the insured or the insurer that it extend through hired or non-owned auto coverage to an employee-owned vehicle being used for work, but recent efforts by plantiff attorneys in some jurisdictions may impose this exposure.
UM/UIM claims are not based on whether or not your organization was at fault for the incident.
Rather, UM/UIM claims are intended to help your injured driver and passengers when another motorist is at fault for an accident and either does not have insurance or has coverage that is not adequate to fully resolve all claims (underinsured).
But when your UM/UIM coverage has a high limit, even a single accident can lead to trouble.
When multiple people in the same vehicle are injured, each person can file a claim. If the at-fault driver’s coverage is inadequate or nonexistent, that becomes multiple claims on your nonprofit’s UM/UIM policy.
Depending on the severity of the injuries, these claims can generate large exposure and can cause losses to add up quickly under higher limits.
So, even though someone else was at fault, your nonprofit could find its coverage maxed out by a major payout under the UM/UIM policy.
Example: A nonprofit van is hit by a driver who is at fault and underinsured. Two non-employee occupants are injured and need ongoing care. UIM can respond after the injured parties settle their liability claims against the at-fault driver for the full available policy limits, even though the nonprofit did not cause the crash.
Why High UM/UIM Limits Can Create Unsustainable Losses
Higher UM/UIM limits mainly raise the amount that can be paid on an injury claim. With a $1 million limit, for example, a single bad event can produce a much larger payout than many organizations expect.
One crash can generate multiple claims: If more than one person in the nonprofit’s owned vehicle is injured, each injured person may present a UM/UIM claim. That can increase the total paid from a single event.
- UM/UIM can apply even when your driver did everything right: Even with strong driver training and good safety practices, your nonprofit can still face a large UM/UIM claim if the other driver has little or no insurance. Unlike personal lines insurance, commercial auto coverage is experience rated. A large auto loss from UM/UIM is functionally the same as an at-fault loss.
- Claim values can escalate quickly: Medical costs and ongoing treatment can push claim values higher, especially in serious injury scenarios. Higher limits can make a costly claim even more expensive for your nonprofit.
When UM/UIM claims get too big or too frequent, insurers must make difficult choices that can affect whether a nonprofit’s coverage stays affordable or even available.
Choosing Limits: A Practical View
It may be tempting to default to the highest UM/UIM limit, especially when a nonprofit’s board wants to make the most protective choice.
In some states, however, lower limits or rejection may not be available, so the real decision may be about understanding what is required.
Although a higher limit can help when injuries exceed the at-fault driver’s available insurance, it also can increase the size of any potential claim, which can raise a nonprofit’s premiums over time.
For nonprofits with employees, remember that workers’ compensation may also apply when an employee is injured in a work-related crash.
Many employers also contribute to employee health coverage, which means the organization may already be helping fund injury-related costs, even before considering higher UM/UIM limits.
When UM/UIM options are available, choose a policy limit that fits how your organization uses vehicles. When those options are limited by law, focus on understanding the exposure.
Some questions to consider may include:
- How much driving happens for your nonprofit in a typical month?
- How many people usually ride in the same vehicle when you travel for work?
- If a serious crash happened tomorrow, what would a large premium increase do to your budget?
- Who signs off on coverage choices, and what information do they need to feel comfortable?
When employees drive their own cars for work, they generally must rely on their own personal auto policy for UM/UIM protection.
The nonprofit’s hired or non-owned auto coverage may help protect the organization if it is pulled into a liability claim. It typically does not extend the nonprofit’s UM/UIM coverage to an employee’s personal vehicle.
Managing Exposure Responsibly
In some states or insurance programs, nonprofits may be required to carry UM/UIM coverage at specified limits, or they may have limited ability to reduce or reject it. That framework works for some organizations, but it can be a stretch for others.
When the coverage level cannot be changed, insurers look more closely at how the nonprofit operates and what it does to reduce the chance of serious losses.
If the nonprofit’s risk still looks too high, the insurer may decide not to offer coverage going forward so the insurance program can remain affordable.
Nonprofits and their brokers can limit sharp swings in costs by making practical choices that reduce their overall risk.
Options include:
- Choose limits that match your real-world use: Set UM/UIM coverage based on how often people drive for your nonprofit and how many passengers are usually in the vehicle. Make sure the coverage level fits the organization’s finances.
- Strengthen driver and vehicle controls: Use basic written rules for seat belts and phone use. Keep maintenance records current. If you screen drivers, keep the process consistent.
- Limit how many people ride together: When possible, avoid putting many passengers in the same vehicle, since one accident could injure several people and lead to a much larger claim.
- Set clear expectations when staff use their own cars for work: Make clear in your vehicle-use policy that employees who drive personal vehicles for the organization generally must look to their own auto policy for UM/UIM protection. The nonprofit’s hired or non-owned auto coverage is liability coverage for the organization. It typically does not add UM/UIM coverage to an employee’s personal vehicle.
- Use data to guide decisions: Look for patterns in past claims and close calls that could point to larger losses later.
Bottom Line
UM/UIM coverage is important, but higher limits can turn one accident into a major financial event, even when the nonprofit is not at fault.
For many small nonprofits, the goal is to avoid surprises so one accident does not throw the mission off course. The larger the insured fleet, the greater the exposure to UM/UIM claims.
A clear UM/UIM decision can help the organization manage risk without adding avoidable strain.
Note: Because UM/UIM requirements and election options vary by state, nonprofits should not assume they can always reject coverage or choose lower limits.
In some states, coverage must be carried or offered in a particular way, so any coverage decision should be reviewed carefully before action is taken.
This post is intended for general information only. It does not guarantee coverage, a defense, or any specific outcome.
Coverage depends on the specific facts and on the terms, conditions, and exclusions in your policy. Contact your insurance broker or agent to determine the appropriate levels of coverage and follow your policy’s claims reporting procedures if an incident may involve a claim.
This does not constitute legal, medical, financial, or professional advice. In an emergency, contact local emergency services first. Any risk management practices mentioned are general suggestions and may not apply to every nonprofit. Follow all applicable laws, licensing rules, and reporting requirements.
