What’s the deal with skimping on auto coverage? Is it because people think they’ll never hit anyone with their car? Maybe they think they have nothing to lose financially? Or could it be because of insurance costs? All of the above?
Whatever the reason, the number of drivers on the road who pay the bare minimum state requirement for auto insurance liability coverage is a problem.
All that skimpy coverage means that if you get in an accident with an at-fault underinsured driver, the odds of that driver’s insurance company fully covering your expenses from the accident are slim to none. So, who pays the rest? Well, sadly you do.
Seems unfair, right? But hold on, there’s a solution. It’s called underinsured motorist (UIM) coverage. It’s a great way to transfer the financial risk of sharing the road with underinsured drivers from you to your insurance company.
Let’s explore how it works.
- What Is Underinsured Motorist Coverage?
- How Does Underinsured Motorist Coverage Work?
- Do You Need Underinsured Motorist Coverage?
- What’s the Difference Between Underinsured and Uninsured Motorist Coverage?
What Is Underinsured Motorist Coverage?
Underinsured motorist coverage protects you financially if you get into an accident with an at-fault underinsured driver. An underinsured driver is someone who has some insurance, but not enough to pay your bills from an accident.
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In addition to medical bills and damage to your car, depending on your state, underinsured motorist coverage can also pay for:
- Lost wages
- Pain and suffering
- Funeral expenses
- Related damages to property other than your car
How Does Underinsured Motorist Coverage Work?
This part’s easy. UIM coverage is only offered in two different types:
- Underinsured motorist bodily injury coverage (UIMBI)
- Underinsured motorist property damage coverage (UIMPD)
Underinsured Motorist Bodily Injury Coverage (UIMBI)
First, the benefits of UIMBI. UIMBI coverage is particularly useful if you’re in an accident with an at-fault driver who has the minimum required car insurance, and you suffer bodily injury from the accident.
In some states, the minimum liability limit for bodily injury is only $15,000, so the underinsured driver that hits you might only be carrying $15,000 to cover your doctor and/or hospital bills. And we all know that medical bills after a bad accident could easily exceed that amount.
But if your UIMBI limit is higher than the at-fault driver's minimum liability limit, your insurance company will pay—up to your policy limit—the gap between the underinsured driver’s insurance payment and the total bill. That could be a huge relief!
Underinsured Motorist Property Damage Coverage (UIMPD)
Next let’s talk about UIMPD. This type of coverage helps pay for damages to your property when an at-fault underinsured driver's insurance policy limits don't fully cover your expenses.
UIMPD coverage isn’t restricted to car damage. Depending on the circumstances and your state, it may also cover valuables inside the vehicle like a computer or cell phone, or outside the vehicle like a fence or mailbox.
What Happens When You File a UIM Claim?
If you get into an accident with an at-fault underinsured driver, you’ll need to file an underinsured motorist claim with your insurance company. They’ll contact the underinsured driver’s insurance company for payment. If the underinsured driver doesn’t have enough coverage to pay your expenses, your insurance company makes an underinsured motorist coverage settlement and pays up to your coverage limit.
For example, let’s assume your medical and car damage repair bills from the accident are $200,000. The at-fault driver only has enough insurance to cover $75,000. You can claim the $125,000 balance against your insurance policy, up to your UIM coverage limit.
Don’t dawdle here though—some insurance providers have a limit on how long you can wait before you file your underinsured motorist claim. This limit can be as little as 30 days, but the length of time varies among insurance companies. Be sure to file your claim as soon as possible.
When your insurance company makes an underinsured motorist coverage settlement, they’ll want copies of all the bills you’ve received related to the accident. If your insurance provider agrees that the expenses are justified, they’ll cut you a check.
Do You Need Underinsured Motorist Coverage?
Yes! We advise that you buy uninsured motorist (UIM) coverage. It’s relatively cheap and can be an enormous financial benefit if you get into an accident with an at-fault underinsured driver.
In some states, UIM coverage adds as little as $5 or $10 to your premium. It can potentially protect you from a huge financial hit so you can save your emergency fund for another time.
Some states require that you include it as part of your auto insurance policy. But even if it’s not required in your state, UIM coverage is worth considering. We recommend connecting with one of our Endorsed Local Providers (ELPs) to find out if it’s required and/or offered in your state.
What’s the Difference Between Uninsured and Underinsured Motorist Coverage?
Underinsured motorist coverage is not the same as uninsured motorist (UIM) coverage. While the names are similar, the way their coverage works is different.
The difference is that uninsured motorist coverage protects you if you get into an accident with an at-fault driver who has no insurance at all. Underinsured motorist coverage, on the other hand, protects you if you get into an accident with an at-fault driver who has some insurance, but not enough to pay your bills from the accident.
Both types of insurance coverage are often bundled together by insurance companies, depending on the state. A handful of states require underinsured motorist coverage, while more states require uninsured motorist coverage.
Get the Right Underinsured Motorist Coverage for You
It’s too risky to go without UIM. It only takes one accident with an at-fault underinsured driver to wipe out your assets. That’s because the responsibility for paying the medical and property damage bills that the underinsured driver’s policy doesn’t cover falls squarely on you.
Before you risk everything you’ve worked so hard for, connect with one of our Endorsed Local Providers (ELPs) to find out what type of underinsured motorist protection is available in your state. Our ELPs work independently, so they can find the best coverage at the best price.