Will you be covered if you get into a fender-bender and discover that the other driver is uninsured? If you have uninsured/underinsured motorist coverage, chances are good that the answer is "yes." Many auto insurance industry experts recommend this type of coverage. You might think that because your state requires insurance, most people have it. However, according to the Insurance Research Council, the estimated number of uninsured drivers can reach 25% in some states.
What is UM or UIM?
Uninsured or underinsured motorist coverage can pay for injuries to you and your passengers, and in some locations damage to your property, when there is an accident and the other driver is both legally responsible for the accident and considered "uninsured" or "underinsured."
An uninsured driver is someone who did not have any insurance, had insurance that did not meet state-mandated minimum liability requirements, or whose insurance company denied their claim or was not financially able to pay it. A hit-and-run driver also counts as uninsured as it relates to bodily injury (UMBI).
An underinsured driver is someone who had insurance that met minimum legal requirements, but did not have payment limits high enough to pay for the damage caused by the accident. In these situations, UM or UIM can pay you for your damages. It is important to note that uninsured and underinsured motorist coverages are separate, although in many states they can or must be purchased together.
Is It Required?
A handful of states mandate purchase of UM/UIM, but most do not. If you purchase coverage, your UM/UIM payment limits usually must comply with the state minimum but cannot exceed your liability limits. If your locality and company allow uninsured motorist property damage (UMPD) coverage, it can't be purchased without UMBI. Also, note that if you're in an accident and try to settle payment with the other driver by yourself, you will not be able to file a claim for UM/UIM protection. It's always best, regardless of what coverage you have, to contact your insurance company for advice on how to handle an accident.
Why Would You Want It?
The Insurance Information Institute's Vice President, Carolyn Gorman, extols the virtues of UM/UIM. "You absolutely need this coverage, because, if you get into an accident with someone who is driving without insurance or doesn't have enough of it, you want to be made financially whole again. You have to protect yourself fiscally and physically, and uninsured/underinsured motorist protection can help you in that regard."
It's usually relatively cheap to add this coverage to your car insurance, especially considering the amount of protection it offers. It could pay your medical bills, lost wages, and pain and suffering. If someone hits you or your car and is legally responsible for the damages, you won't get any money from them if they don't have money to give you. Especially during times when people are struggling economically, many drivers either do not have insurance or do not have enough insurance. If you have UM/UIM, you can get money even if the other driver doesn't have enough.
Underinsured Motorist Protection
Underinsured motorist protection pays you for damages that exceed the amount of coverage carried by a driver who is considered underinsured. UIM will only pay up to the limits of your policy after subtracting the amount paid by the other driver's insurance. This means that the amount listed as your UIM limit is the total amount paid by both insurance companies, not the additional amount your insurance company will pay after the other driver's insurance pays. Both UM and UIM apply to you and any passengers in your car, and to you and others listed on your insurance policy (including family members) when in other cars.
Uninsured Motorist Property Damage
Uninsured motorist property damage (UMPD) coverage may seem strange, especially considering many people already have collision coverage on their car insurance. However, for careful drivers who don't have collision coverage, UMPD can be a good way to protect their car from uninsured drivers without raising their premium a lot. In addition, a lower deductible for UMPD is frequently cheaper than collision coverage with the same low deductible. UMPD does not apply in hit-and-run accidents, because UMPD coverage is cheaper than collision coverage—making it very tempting for some drivers to make a "hit-and-run" claim under their UM coverage instead of their collision coverage, or to purchase UM coverage and not have collision coverage at all.
Uninsured Motorist Bodily Injury
Uninsured motorist bodily injury (UMBI) protection can help you in another way. "Let's say you're a pedestrian. If you carry this coverage and you get hit by a car while you're trying to cross the street, the coverage could pay your medical expenses and lost wages," says Gorman. That could be important, because even if you have medical payments coverage and health insurance, those still won't pay for lost wages. You could get coverage for your lost wages by purchasing disability insurance, which many people have through their employer, but it would not cover your passengers or family members, and could disappear if you switch jobs. In addition to protecting you as a pedestrian, UM/UIM can also protect you and your family members traveling in other cars. As Nicole Mahrt of the American Insurance Association says, "You probably can't afford to drive without it."
Do you have any questions or comments? Please let us know.
Originally posted September 17, 2004.