Published On: Thu, Sep 7th, 2023

Uninsured and Underinsured Motorist Coverage: What You Need to Know

According to insurance statistics, the average person gets in a claim-worthy car accident once every 17 or so years. Considering most of us start driving around the age of 16 and turn in our licenses around 80, that’s about three or four significant car crashes in our lifetime.

Although insurance policies are intended to mitigate the financial damage in a collision, many people have to seek out a personal injury lawyer to get enough compensation to cover their bills, especially when one of the parties is uninsured or underinsured.

What’s the difference between these two terms, and how do they affect you? Keep reading to understand how to protect yourself from the financial liability each brings.

photo supplied, courtesy of guest blogging network

Uninsured Motorist Coverage

Each state has its own laws regarding automobile insurance, but the long and short of it is that if you drive a car, you need to protect yourself and others in your care financially. Some states allow you to store bonds instead of carrying an auto policy, but there are strict regulations regarding these, too.

Still, even with laws and potential punishments, around one in eight people drive without insurance. These individuals are “uninsured,” with no policy to cover them or anyone injured in a car crash caused by them.

When that happens, those people are stuck with any bills resulting from the accident. If they must miss work because of their injuries, they lose income, too. An insurance policy could have reimbursed them for at least some of their paycheck.

Ensuring You’re Covered for Uninsured Drivers

So, how can you ensure that doesn’t happen to you? Your insurance policy can protect you, even when the driver doesn’t have coverage.

Uninsured motorist coverage (UM or UMBI) is an optional add-on in your policy that takes care of any damage when someone without insurance injures you or your passengers. This is a way to protect you from unexpected situations, such as hit-and-runs, drivers without liability coverage, or drivers who have paid for insurance but whose company denies responsibility or is insolvent and can’t pay.

Those situations happen more frequently than you might expect, leaving you and others in your vehicle with hefty financial burdens. A car accident doesn’t just result in medical bills. You’ll also have the consequences of not having a paycheck if you can’t work because of your injuries. In the event of a death, there are funeral expenses to consider. And, not to be overlooked, you have the physical and emotional pain and suffering. Uninsured motorist coverage takes care of all of those aspects.

Property Damage From Uninsured Motorists

Another common side effect of a collision is property damage, but if the at-fault driver doesn’t have insurance, who pays to have your car fixed? 

Your insurance policy may allow you to take out uninsured motorist property damage. This covers your vehicle’s damage when you’re hit by an uninsured driver. It’s an additional level of protection over your collision coverage.

What About Underinsured Motorist Coverage?

Not to be confused with uninsured coverage, UIM — underinsured motorist insurance — is an entirely different ballgame. This insurance is sold separately from your primary auto insurance, although it can be bundled with UM.

Underinsured coverage steps in and takes over, protecting your financial liability when your accident is caused by another driver who doesn’t have enough insurance to pay all your bills. 

Here’s an example of when UIM would come in handy. You’re in a car accident where you are not at fault. The crash causes you to break your leg, requiring multiple surgeries throughout the course of your recovery. The at-fault driver’s insurance was $25,000, the minimum required by the state. 

This pool of money disappeared quickly, leaving you with the rest of the responsibility for your bills. However, you had an underinsured motorist policy, which kicked in and covered the rest of your medical bills.

Is Uninsured Motorist Coverage Required?

Certain states require you to carry uninsured motorist coverage, but underinsured is optional. When it’s mandatory, you must buy a policy with the state minimum or higher. This typically is the same amount as your liability policy.

Whether it’s required or not, uninsured motorist coverage is a good idea to have as a buffer between you and serious financial difficulty. Since it typically costs under $150 per year or about $13/a month, it’s worth the extra few dollars to have the peace of mind it brings.

Keep in mind that UIM coverage is only sold alongside an automobile insurance policy. You

You can’t buy only uninsured motorists, uninsured property, or underinsured motorist coverage. You’ll need to also have at least a basic auto insurance liability policy. The policy responsible for your damages will depend on whether your state is an at-fault or no-fault state.

Do You Need UM Insurance?

No one wants to pay for more coverage than they need, and car insurance tends to be expensive without any add-ons. But if you can’t afford an extra $13 a month, you definitely won’t want to pay the bills caused by an uninsured driver.

When you’re considering adding UM coverage to your policy, first, find out if your state requires it. Your insurance carrier will let you know this quickly. If it’s not mandated, you can buy it as an optional add-on with matching UM and bodily injury limits.

Don’t let the cost of the coverage deter you. Shop around for different quotes, keeping the coverage the same. Don’t just look at the cost. Compare “apples to apples” by ensuring everything in the insurance policies you’re given matches up. It’s easy to give someone a cheaper policy if you’re cutting coverage at the same time, but that may not be the best deal for you.

Look around for reviews on car insurance companies, compare quotes, and see how much your rates would be if you added UM, UMPD, and UIM. As with all insurance, it’s a matter of “Better have and not need it than need it and not have it!”

Author: Laura Brown

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