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Understanding Auto Insurance: Uninsured and Underinsured Motorist Coverage

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 | June 22, 2017
What is un/underinsured motorist coverage?

This article is the final installment in a series on auto insurance coverage. You can read about other types of auto policies here: Bodily Injury Liability; Personal Injury Protection; Property Damage; Collision Coverage; Comprehensive Coverage.

Most states in the U.S. require all car owners to have some form of auto insurance to protect from the high costs associated with car accidents. Whether a minor dent or a series injury, automobile accidents can cause significant financial burdens—without the proper insurance.

But what if the other driver doesn’t have the appropriate auto coverage?

You’re a responsible driver. You get at least the state’s minimum requirement of auto insurance coverage. You drive safely and you pay your premiums.

But not everyone is as responsible as you are. According to the Insurance Information Institute, 1 in 8 drivers has no auto insurance at all. Furthermore, many people only get the bare minimum coverage for their state, which isn’t always enough to cover costs in serious accidents.

So what happens? How do you pay for damages if you are hit by a motorist who doesn’t have insurance? How do you make up the difference if the at-fault driver doesn’t have enough insurance to pay all your medical costs or auto repairs?

This is where your Uninsured Motorist (UM) or Underinsured Motorist (UIM) Coverage would come in.

What Does It Cover?

If you get into an accident and the other driver is found at-fault, typically his or her liability coverage would help to cover your medical or property costs. If the motorist don’t have insurance, though, you would end up paying out of pocket to cover these costs (unless you filed a lawsuit, which is a long and unpredictable process).

Thus, uninsured and underinsured motorist coverage can help you pay for your costs if the other driver (who is at-fault) does not have the appropriate coverage to pay for all of your expenses. Sometimes uninsured coverage will also pay for a hit and run driver.

Uninsured

There are two types of uninsured motorist coverage:

  • UMBI: Uninsured Motorist Bodily Injury helps cover costs if you or a passenger has injuries from the crash that the uninsured driver caused.
  • UMPD: Uninsured Motorist Property Damage helps cover costs if your property or car was damaged by an uninsured driver.

Underinsured

Each state defines “underinsured” differently. Often, an underinsured driver doesn’t have enough liability coverage to cover all of your bills after an accident. In some states, an underinsured motorist is defined as someone whose liability limit is less than your underinsured motorist coverage limit.

If an underinsured motorist hits you, you will generally make a claim with their insurance company. They will pay you up to their at-fault driver’s liability policy limit, which in this case would be insufficient to cover your costs.

Then, your insurance company investigates the claim further. Your Underinsured Motorist Coverage (UIM) can then help make up the difference in costs for the excess amount of your bills, up to the limit of your UIM policy. If your UIM policy is still not enough to pay, you could also consider legal action against the at-fault driver.

Is It Required?

Uninsured/underinsured motorist coverage is required in some form in the following states: Connecticut, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, West Virginia, Wisconsin, District of Columbia.

Some states require only uninsured bodily injury, some require uninsured property damage, and some require both uninsured and underinsured. It’s important to talk to an agent who knows your state to determine what your legal minimum limits are. Get a quote with InsuraMatch to figure out just how much UM/UIM coverage you need.

How Much Does It Cost?

A lot of people don’t want uninsured and underinsured motorist coverage simply on principle: if I have auto insurance coverage, so should everyone else. While that sentiment may feel right, it’s unfortunately not always true in reality. In this way, it’s a good idea to add on UM/UIM to your insurance policy to continue to protect your finances in case of an incident.

Many insurance providers will bundle uninsured and underinsured together. Otherwise, you can buy split limit plans for uninsured into UMBI and UMPD or you can choose a combined single limit plan (which is more flexible but more expensive).

Typical coverage limits can range from $5,000 up to $1 million. Many agents recommend having a UM limit similar to your bodily injury limit. In this way, you still have the same amount of coverage to pay for your medical expenses no matter the situation.

Generally, uninsured or underinsured motorist coverage costs about 5% of your annual auto insurance premium. In this way, it doesn’t add much to your monthly cost, but it can be a significant help in the case that no one is there to pay.

Nevertheless, there are a lot of factors that go into the cost of your premium. For example, some states have more uninsured drivers than others, so premiums in those areas tend to be higher. Thus, you need to chat with someone who knows auto insurance.

Talk to an InsuraMatch agent today to calculate your uninsured or underinsured premium, along with your other auto policy costs!