Uninsured Underinsured Motorist Coverage: What You Need to Know
Last updated Monday, November 20th, 2023
Picture this: You’re driving home after a long day at work, and suddenly, another driver carelessly collides with your vehicle. To make matters worse, the at-fault driver doesn’t have enough insurance to cover the damages. That’s where uninsured underinsured motorist coverage (UM/UIM) comes to your rescue. This essential component of auto insurance policies provides financial protection in case of an accident with a driver who has insufficient or no insurance.
Understanding Uninsured and Underinsured Motorist Coverage
Uninsured and underinsured motorist coverage, also known as uninsured motorist insurance, serves as a safety net, ensuring that you don’t have to bear the financial burden of an accident caused by a driver who lacks adequate insurance. It compensates you for damages resulting from collisions with uninsured or underinsured drivers, including medical expenses, lost wages, and even pain and suffering.
According to the Insurance Research Council, a significant number of drivers on the road are either uninsured or underinsured. Accidents involving such drivers, including an uninsured driver, can lead to substantial out-of-pocket expenses if you don’t carry the right coverage. In fact, liability insurance alone may not be enough to protect you from the financial consequences of an accident with an uninsured or underinsured driver.
While pursuing legal action against the at-fault driver could be an option, it can be a lengthy process that may require hiring an attorney. Uninsured and underinsured motorist coverage provides a more immediate and reliable source of financial support, offering much-needed peace of mind in the aftermath of an accident.
Types of Uninsured and Underinsured Motorist Coverage
There are two main types of uninsured and underinsured motorist coverage: bodily injury (UMBI/UIMBI) and uninsured motorist property damage (UMPD/UIMPD). UMBI/UIMBI coverage helps pay for medical expenses, lost wages, and other injury-related costs that result from an accident with an uninsured or underinsured driver. On the other hand, UMPD/UIMPD coverage protects your vehicle by covering the cost of repairs or replacement if it’s damaged by an uninsured or underinsured driver.
Both coverage types are vital elements of auto liability insurance, a legal requirement in most states. By carrying the appropriate UM/UIM coverages, you can ensure that you have the financial protection necessary to navigate the aftermath of an accident with an uninsured or underinsured driver.
How Uninsured and Underinsured Motorist Coverages Work
In the event of an accident with an uninsured or underinsured driver, your UM/UIM coverage steps in to compensate you for damages caused by the at-fault party. If the other driver has no insurance, your uninsured motorist coverage will cover the cost of vehicle repairs or medical expenses up to the limits of your policy. In cases where the at-fault driver has insufficient insurance, their policy will pay for damages up to their policy limits, and your underinsured motorist coverage may cover the additional amount up to your selected limits.
Without uninsured motorist coverage, you risk not receiving any payments for damages, no matter who is responsible or if the accident was a hit-and-run. Thus, having UM/UIM coverage is key to preventing the financial burden of an accident that wasn’t your fault.
Keep in mind that UM/UIM coverage is subject to the limits you choose when purchasing your auto insurance policy. It’s essential to select coverage limits that adequately reflect your financial needs and potential expenses in the event of an accident with an uninsured or underinsured driver.
State Requirements for Uninsured and Underinsured Motorist Coverage
State requirements for uninsured and underinsured motorist coverage vary, with some states mandating coverage and others offering it as an optional choice. For instance, in Virginia, drivers are required to purchase both uninsured motorist (including property damage and bodily injury) and underinsured motorist coverage. In Wisconsin, uninsured motorist bodily injury coverage is mandated, encompassing underinsured motorist bodily injury coverage as well.
On the other hand, states like Rhode Island have more nuanced requirements. Uninsured motorist coverage is not mandatory if state minimum limits for bodily injury auto liability coverage are carried. However, if higher auto liability limits are purchased, uninsured motorist bodily injury coverage must be acquired, which includes underinsured motorist, bodily injury, and property damage coverage.
You should acquaint yourself with your state’s requirements and confirm that you have the required coverage to safeguard your finances in case of an accident with an uninsured or underinsured driver. Failing to carry the required coverage can result in penalties, fines, and even license suspension in some states.
Determining the Right Amount of Coverage
To figure out the appropriate amount of UM/UIM coverage, take into account factors like your assets, possible medical expenses, and the probability of meeting uninsured or underinsured drivers in your area. The value of your personal assets plays a significant role in determining the coverage you need, as it helps protect your financial assets from the costs of a car accident. The more considerable your net worth and the value of your assets, the more coverage you may need to adequately protect yourself.
Another important factor to consider is the potential for high medical expenses. UM/UIM coverage offers protection in the event of an accident with an uninsured or underinsured driver, ensuring that the necessary financial support is available to cover medical expenses and car repairs. Additionally, calculating potential lost wages if you’re unable to work due to an accident is essential to guarantee you have the necessary coverage to compensate for this financial deficit.
By considering these factors and analyzing the variety of coverages available, you can make a reasoned decision about the suitable amount of UM/UIM coverage to safeguard you and your assets in case of an accident with an uninsured or underinsured driver.
Costs and Discounts Associated with UM/UIM Coverage
The cost of UM/UIM coverage varies depending on factors like location, coverage limits, and discounts. On average, uninsured motorist coverage costs around $136 per year. To secure the most competitive rate, it’s necessary to investigate and get multiple quotes from different insurance providers.
Some insurers may offer discounts for bundling multiple insurance products, including car insurance, maintaining a clean driving record, or completing a defensive driving course. By shopping around and comparing quotes, you can find the best deal on UM/UIM coverage that meets your financial and personal needs.
Filing a Claim for Uninsured and Underinsured Motorist Coverage
If you need to file a claim for UM/UIM coverage, it’s important to adhere to the required steps to guarantee a smooth process. Begin by reporting the accident to your insurance company as soon as possible, as some providers may impose a time limit for filing a claim.
Next, gather information and documentation to support your claim, such as medical bills, repair estimates, and a detailed account of the accident. Be sure to submit all required documentation to your insurance company, as the requirements may vary between providers.
When filing an uninsured or underinsured motorist claim, be cautious to avoid common errors that could jeopardize your claim. These include:
- Failing to report the accident promptly
- Not obtaining adequate proof
- Underestimating the value of your claim
- Not consulting legal counsel
- Concluding the process hastily
Stacking Insurance: Pros and Cons
Stacking insurance allows you to increase your UM/UIM coverage limits by combining coverage from multiple policies or vehicles. If you add a second car to your policy and have UMBI limits of $50,000/$100,000, stacking can be applied. This increases your limits to $100,000 per person and $200,000 per accident. This can provide greater protection in the event of an accident with an uninsured or underinsured driver.
However, not all states allow stacking, and it may result in a higher premium. It’s important to balance the advantages and disadvantages of stacking insurance and decide if it’s the best decision for you, considering your financial needs and your state’s regulations.
Additional Considerations and Optional Coverages
To ensure complete protection in case of an accident with an uninsured or underinsured driver, consider additional coverages and options. Medical payments coverage, for example, pays limited medical expenses for individuals injured in the vehicle driven by the insured, regardless of who is responsible for the accident.
Collision and comprehensive coverage are also worth considering, as they provide protection for your vehicle in case of damage or theft. Additionally, rental reimbursement coverage can help cover the cost of renting a vehicle while your car is being repaired due to an accident.
By reviewing your auto insurance policy and assessing your needs, you can ensure that you have the most comprehensive protection possible in the event of an accident with an uninsured or underinsured driver. It’s necessary to meticulously assess all available coverages, including your car insurance policy, and make reasoned decisions regarding your insurance needs.
Frequently Asked Questions
What is the difference between uninsured and underinsured?
Uninsured motorist coverage protects you if you’re hit by an uninsured driver, while underinsured motorist coverage kicks in when the at-fault driver has insufficient liability limits to cover your losses.