Uninsured and Underinsured Motorist Coverage

by Nikola Djurkovic
Uninsured Motorist Guide Cover Image

If you’re hit by a driver who doesn’t have car insurance, you may find yourself in an unenviable situation. You’ll have to pay any expenses out of your pocket and then rely on the justice system to get your money back. However, suing somebody is a lengthy process. Furthermore, it happens often that the uninsured driver doesn’t have enough money to cover the damages.

To avoid all that, you can add uninsured motorist coverage to your policy. This coverage was specifically designed to protect you from drivers without insurance. Basically, it lets you make a claim for the damage inflicted by an uninsured driver. You’re also covered if the at-fault driver has insurance but the damage exceeds their limits.

However, if you plan to buy this coverage or you already have it, there’s a multitude of insurance technicalities you should be aware of. Here you will find all those details explained as plainly as possible. Additionally, you’ll discover how much this protection plan costs and how to get the most out of it.

What Is Uninsured Motorist Coverage?

It’s a type of insurance that pays the expenses an uninsured at-fault driver cannot cover. In some states it’s mandatory, and in others, optional. Underinsured or uninsured motorist coverage, depending on the definition, may be one of the following three coverages. In some states, they’ll be bundled together.

Uninsured Motorist Property Damage Coverage (UMPD) – This coverage pays for the property damage inflicted by an at-fault driver without insurance. It is not available in all US states.

Uninsured Motorist Insurance (UM or UMBI) – This coverage pays for the medical expenses that the uninsured at-fault driver is responsible for.

Underinsured Motorist Insurance (UIM or underinsured motorist bodily injury reimbursement) – This protection plan pays the injury-related expenses that the at-fault driver without sufficient insurance inflicted on others.

What’s Covered by Uninsured Motorist Protection

Uninsured and underinsured motorist coverages pay for yours and your passengers’ medical expenses. They also protect you in a hit-and-run accident. They may even cover lost wages and pain and suffering. You’ll receive payment only if the uninsured driver was at fault. Additionally, you must make a claim against your insurance company.

Uninsured motorist property damage coverage pays for the damage inflicted upon your vehicle by a driver without insurance. Furthermore, in some states, it may cover personal property like cellphones, tablets, watches, and similar items. It works the same as uninsured motorist protection in all other aspects, meaning it protects you against hit-and-run drivers.

How Does Uninsured Motorist Coverage Work?

Like all insurance coverages, uninsured motorist coverage has a limit, which is the maximum amount your insurance company will pay. For medical expenses, you have a choice between the split and the combined limits. An example of the split limit would be $30,000/$60,000. The first number is the maximum payout per person while the second is per accident. Alternatively, you can choose a combined limit, which is the maximum payout per accident, regardless of the number of people involved.

For property damage, there’s no such difference, meaning there’s a single number that is the highest amount your insurance company would pay. In some states, this coverage carries a deductible, which is the amount you would pay out of your pocket.

How Does Underinsured Motorist Coverage Work?

For underinsured motorist protection, things are a little bit more complicated. As AllLaw’s guide on insurance law notes, this coverage pays only the difference between your limits and the at-fault driver’s insurance. For example, if the total damage was $250,000, the limits of the guilty driver were $150,000, and your limits for underinsured coverage were $200,000, then you would receive a $50,000 settlement from your own insurer.

Example:

Total Damage Suffered: $250,000

At-Fault Driver’s Insurance: $150,000

Underinsured Coverage Limits: $200,000

Your Payment from Insurance Company: $200,000-$150,000 = $50,000

Payment out of Your Pocket: $50,000

Important Facts About Uninsured/Underinsured Motorist Coverage

Insurance companies don’t allow either uninsured or underinsured motorist coverage to exceed your liability limits. This is just a business decision for them since these two coverages are relatively cheap compared to liability insurance. They don’t want to end up with a customer purchasing minimum liability and then getting high uninsured/underinsured coverage limits.

Another important thing to remember is that a lot of insurers set a deadline for making an uninsured motorist claim. This means you should notify your insurer you intend to make a claim as soon as possible. This is especially important given the fact that it takes longer for this kind of claim to develop. You’ll only know the full situation after receiving the bill for your medical treatment.

It’s also good to know that this coverage follows a driver. This means that it protects you when you’re driving your car, a rented vehicle, or one borrowed from a friend. Uninsured motorist coverage will even apply if you’re a passenger or using public transport.

Where Is Uninsured vs Underinsured Motorist Coverage Mandatory?

Some states may require one, two, or all three types of uninsured or underinsured coverages. If multiple coverages are mandatory, insurance companies often bundle them in one package. Check the full list below for information on laws in each US state that requires some form of this coverage.

Full list of States where Uninsured/Underinsured coverage is mandatory

Who Needs Uninsured Motorist Coverage?

If you are not based in one of the 21 states that require some form of uninsured/underinsured coverage, you might be wondering whether it really is worth adding to your policy.

On average, 15% of the drivers on the road do not have mandatory liability insurance. And even more hit the roads with insufficient liability limits. Given this, coupled with the relatively low cost of uninsured motorist coverage, we would recommend that anyone add this coverage to their plan if they can afford it.

However, if you are working on a tight budget and you want to include only what’s necessary, you may want to drop this coverage. The best way to decide is to check the percentage of uninsured drivers in your home state. For example, uninsured motorist coverage in states like Colorado may not be worth it because the number of drivers without car insurance isn’t high enough.

Below is the list of states with the highest and the lowest percentages of uninsured drivers. You can check the Insurance Information Institute’s recent statistics for even more details.

The list of US states with the highest and the lowest percentage of uninsured driversAnother important factor to take into account is the minimum insurance in your home state. If it has low minimum limits, like Florida, then getting uninsured motorist coverage looks like a smart investment. And if your vehicle is an expensive model, adding this coverage makes even more sense.

What’s the Cost of Uninsured Motorist Coverage?

Uninsured/underinsured coverage is one of the cheapest coverages to have. It usually costs anywhere between $5 and $30 per month, depending on the limits and state laws. We conducted research in multiple cities, for various age categories, to determine what the price of this coverage would be. Our quotes included liability insurance since it’s mandatory in almost every US state.

Monthly Prices of Car Insurance that Includes Uninsured/Underinsured Motorist Coverage

Shopping Tips for Uninsured Motorist Coverage

Given the low price of this protection plan, we wouldn’t base our choice of an insurance company on it alone. But keep in mind that negotiating and shopping around just for the sake of this coverage would save approximately $30 annually.

Of course, getting an affordable insurer should not imply sacrificing quality. Still, when you factor in the entire monthly premium, which includes uninsured motorist coverage, saving up to a few thousand dollars annually is possible.

To get the finest insurance, we’d first determine the right limits and deductibles for all the coverages we want included in our policy. After that, we would check out the best auto insurance reviews to learn more about each major insurer in the US. We would focus primarily on the quality of customer service, but we’d take financial strength and the number of discounts and optional coverages into account too.

Once we’ve studied the reviews, we’d include up to eight companies that we like the most and get a quote from all of them. It’s pretty easy to customize your uninsured/underinsured motorist coverage, and completing an online quote doesn’t take more than 15 minutes. Of course, some companies don’t make it easy to obtain an online quote. However, even if you have to call your local insurance agency a few times, the whole process shouldn’t take more than one afternoon. It’s a small price to pay for getting the best auto insurance at the lowest price.

Conclusion

Uninsured motorist coverage is an inexpensive addition to your car insurance policy, and it can quite come in handy if a driver without insurance crashes into you. It’s sometimes bundled with an underinsured protection plan or uninsured coverage for property damage. Given its low price, we recommend this coverage to all drivers who can afford it.

The price of coverage is low enough to not justify changing insurers just to get a discount. Nonetheless, if you’re adding expensive protection plans like Personal Injury Protection, you can save a lot by exploring the market.

Frequently Asked Questions

How much uninsured motorist coverage do I need?

There is no universal answer to this question, but we would choose at least a $100,000 limit for medical expenses. We also recommend that you base the property section on the value of your car. For example, if you drive a $25,000 car, a $30,000 limit would likely cover all possible damage to the vehicle, as well as any personal belongings.

What is underinsured motorist property damage?

It is a type of insurance coverage that repays the property damage that an underinsured driver caused. For example, if your $30,000 vehicle was totaled, and the driver’s limit was $25,000, your UMPD coverage would cover the remaining $5,000. For this to happen, your UMPD limit has to be at least $30,000.

What is stacked uninsured motorist coverage?

Stacking is a process of combining multiple UM limits into one. It can be done either within one policy or across multiple policies. Let’s imagine that you have three cars on one policy, each with a $30,000 UMBI limit. If you suffered injuries in an accident where an uninsured/underinsured driver was at fault, you can use $90,000 as your limit. It functions similarly across multiple policies. It’s available only in a couple of states, and it makes the premiums higher.

What is non-stacked uninsured motorist coverage?

It’s coverage where the limits are not combined across your policies or summed up for multiple vehicles on one policy. It provides less protection than the stacked coverage, but it’s also cheaper.

Why is it a good idea for you to purchase uninsured and underinsured motorist​ coverage?

Around 15% of all drivers don’t have mandatory liability insurance, and even more only have the minimum limits. If such a driver hits you, you will likely end up paying out of your pocket for medical expenses and property damage. To avoid such situations, it’s smart to add underinsured and uninsured coverage to your policy. And it’s quite cheap too.

Do I need uninsured or underinsured coverage if I have collision and comprehensive insurance?

Yes, we strongly recommend buying this coverage even if you have collision or comprehensive insurance on your policy since they cover entirely different items.

The only possible overlap can happen between collision coverage with adequate limits and uninsured motorist property damage coverage. Since collision insurance covers damage to your vehicle regardless of fault, even if the other driver’s property damage liability is too low, you can collect the collision payment from your insurance company. From there, you can leave it to your insurer to pursue reimbursement from the at-fault driver.

Nonetheless, you should expect a significant increase in your premium if you choose this route, meaning adding uninsured motorist coverage is a smarter thing to do.

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