Driving on the road presents inherent risks, not only from the possibility of accidents but also from encountering drivers who don’t carry adequate insurance or, in some unfortunate cases, any insurance at all. This is where Underinsured/Uninsured Motorist (UM/UIM) Coverage comes into play. It provides a layer of financial protection for drivers who find themselves in accidents caused by other motorists who lack sufficient coverage.
In this article, we will explain what underinsured and uninsured motorist coverage is, how it works, why it’s essential, and the differences between the two. Understanding this type of coverage can help ensure you are adequately protected in the event of an accident with a driver who is either uninsured or doesn’t have enough coverage to fully compensate you for your injuries and damages.
What Is Uninsured Motorist Coverage (UM)?
Uninsured Motorist (UM) Coverage is a type of auto insurance that provides compensation for injuries and damages when you are involved in an accident caused by a driver who does not have insurance. Despite laws requiring car insurance in most states, a significant number of drivers still operate their vehicles without adequate insurance coverage. UM coverage ensures that if you’re in an accident with an uninsured driver, you won’t be left without financial assistance to pay for your medical bills, property damage, and other associated costs.
Here’s how UM coverage works:
- Accident with an uninsured driver: If you are involved in a car accident where the other driver is at fault and they have no insurance, your UM coverage will pay for your medical expenses, property damage, and other costs associated with the accident.
- Hit-and-run accidents: UM coverage also applies to hit-and-run accidents. If the other driver flees the scene of the accident and their identity cannot be determined, your own UM coverage can help cover your medical costs and damages as if the fleeing driver were uninsured.
For example, if you’re involved in an accident with a driver who has no insurance, and the accident causes $20,000 in medical expenses, your uninsured motorist coverage would help pay for those costs, up to the limits of your policy.
What Is Underinsured Motorist Coverage (UIM)?
Underinsured Motorist (UIM) Coverage, on the other hand, provides protection when the at-fault driver has insurance, but their policy limits are not high enough to fully cover the damages and medical expenses caused by the accident. Many drivers may carry the minimum required liability coverage, which may not be sufficient in serious accidents.
UIM coverage bridges the gap between what the at-fault driver’s insurance will pay and what you actually need to cover your expenses. For instance, if you are involved in an accident with a driver whose insurance only covers $10,000 in medical expenses, but your medical costs exceed $50,000, your underinsured motorist coverage would pay the remaining $40,000, assuming you have the appropriate limits on your policy.
Here’s a simple breakdown of how UIM works:
- Inadequate coverage: When the at-fault driver has liability coverage, but it’s insufficient to cover your damages, UIM coverage steps in to provide additional compensation.
- Medical expenses and property damage: UIM coverage can help pay for medical bills, car repairs, lost wages, and other damages beyond the at-fault driver’s policy limits.
Why Do You Need UM/UIM Coverage?
Having UM/UIM coverage on your auto insurance policy is essential for several reasons. While most drivers are responsible and carry adequate insurance, others may not. Here’s why you should consider having this coverage:
1. Protection Against Uninsured Drivers
Despite legal requirements in most states, a significant number of drivers continue to operate vehicles without car insurance. According to the Insurance Research Council, approximately 13% of all drivers in the United States are uninsured. This means that if you’re involved in an accident with one of these drivers, you may have limited recourse to recover the costs of your injuries or property damage.
Uninsured motorist coverage offers a safety net when you’re in an accident caused by someone who is financially unprepared to pay for the damages. Without this coverage, you might have to take legal action to try to recover costs from the at-fault driver, which can be a difficult and time-consuming process, especially if the driver has no assets.
2. Protection Against Underinsured Drivers
In many cases, drivers may have insurance, but it might only be the minimum required by state law, which could be insufficient in covering the costs of an accident. A serious accident can result in high medical bills and extensive property damage. Without underinsured motorist coverage, you may find yourself facing significant out-of-pocket expenses if the at-fault driver’s policy doesn’t cover the full amount of damages.
For instance, if you’re in an accident with someone who has the minimum coverage, and your medical expenses exceed the at-fault driver’s insurance limits, UIM coverage will help cover the difference, ensuring you don’t have to bear the financial burden alone.
3. Hit-and-Run Protection
Hit-and-run accidents are more common than many drivers realize. In fact, the National Highway Traffic Safety Administration (NHTSA) reports that approximately one in five crashes involves a hit-and-run driver. If the driver responsible for the accident flees the scene, it may be impossible to track them down. Without uninsured motorist coverage, you would have to cover the costs of your damages yourself. With UM coverage, however, you are protected, as it treats hit-and-run accidents similarly to accidents with uninsured drivers.
4. Peace of Mind
Having UM/UIM coverage provides peace of mind, knowing that you are financially protected in the event of an accident caused by an uninsured or underinsured driver. In today’s world, where medical bills and repair costs can quickly escalate, this coverage offers a valuable safety net.
5. No-Fault or At-Fault System Coverage
Regardless of whether you live in a “no-fault” or “at-fault” state, UM/UIM coverage can help cover the costs in various accident scenarios. In no-fault states, where each driver’s insurance typically covers their own injuries regardless of fault, UM/UIM coverage is still useful for covering costs that may exceed the other party’s insurance.
Differences Between UM and UIM Coverage
While both uninsured and underinsured motorist coverage protect you in the event of an accident with a driver who lacks sufficient insurance, there are distinct differences:
- Uninsured Motorist Coverage (UM): Provides compensation when the at-fault driver does not carry insurance. This applies to accidents where the other driver is either uninsured or their insurance policy cannot be traced or identified (e.g., in hit-and-run incidents).
- Underinsured Motorist Coverage (UIM): Provides compensation when the at-fault driver has insurance, but it is not enough to cover your full expenses. UIM helps make up the difference between your actual costs and the at-fault driver’s policy limits.
In some cases, insurance companies may offer combined UM/UIM coverage, which gives you protection against both uninsured and underinsured drivers. This may be a more cost-effective option for those seeking complete coverage.
How Much UM/UIM Coverage Do You Need?
The amount of UM/UIM coverage you need depends on various factors, such as the level of protection you desire, your state’s minimum requirements, and your financial situation. It’s recommended that you carry UM/UIM coverage limits that match your liability limits to ensure adequate protection. For instance, if you have $100,000 in liability coverage, you might want to consider $100,000 in UM/UIM coverage to fully protect yourself.
Some states have minimum coverage limits for UM/UIM policies, but you may want to consider purchasing higher limits to ensure that you are adequately protected in the event of a serious accident. Additionally, if you live in an area with a high rate of uninsured drivers, it may be especially important to carry higher UM/UIM coverage.
Is UM/UIM Coverage Required by Law?
The requirement for UM/UIM coverage varies by state. Some states require it, while others offer it as an optional add-on to your auto insurance policy. In some states, you are automatically provided with UM/UIM coverage when you purchase auto insurance, but you may have the option to reject it in writing. However, even in states where it is optional, it is often strongly recommended to carry this coverage, as it offers critical financial protection.
Conclusion
Uninsured/Underinsured Motorist (UM/UIM) coverage is a crucial component of any comprehensive auto insurance policy. It provides essential protection against the financial fallout of an accident caused by a driver who does not have enough insurance or, in the worst-case scenario, no insurance at all. Whether it’s covering medical expenses, property damage, or lost wages, UM/UIM coverage ensures that you are not left financially vulnerable after an accident caused by someone else.
While the cost of adding UM/UIM coverage to your policy may seem like an additional expense, the peace of mind it offers is invaluable. By adding this coverage, you are safeguarding your financial future and ensuring that you are adequately protected, regardless of who is at fault for the accident.