Uninsured Motorist Insurance Explained

Uninsured Motorist InsuranceFor many people, one of their greatest fears is getting into an accident with a driver who isn't insured. Fortunately, if you have uninsured/underinsured motorist protection as part of your auto insurance policy, you're probably protected. But what is this coverage, exactly, and how does it work?

Put simply, uninsured or underinsured motorist coverage (UM/UIM) pays for injuries to you and your passengers - and sometimes damage to your car - when you are in an accident where the other driver is at-fault and either has no car insurance, or not enough insurance to cover their liability.

In many states such coverage is mandatory, and goes along with state-mandated liability requirements as the minimum allowable coverage to drive legally. Nevertheless, even in states where mandatory minimums are required by law, the number of uninsured drivers can be as high as 25% of the entire driving population.

Knowing this, it makes sense to include UM/UIM coverage with your car insurance policy even if your state doesn't require it. It's not that expensive, but there are a few things you should know about it:

  • What does "uninsured" mean? Uninsured drivers either have no auto insurance whatsoever, have some insurance, but not enough to meet the minimum amount required by law in their state of residence, or have had their accident claim denied by their insurance company. Hit-and-run drivers are generally considered to be uninsured motorists with regard to bodily injury coverage.
  • What does "underinsured" mean? Underinsured motorists generally do have insurance that meets the "financial responsibility" requirements for their state, but do not have enough coverage to pay for the damages you incurred.
  • Must I make a claim?Yes. If you settle with the other driver without making a claim, not only are you not guaranteed to be made financially whole, but you also have no right to make a claim for the same accident later on.
  • Exactly what will my UM/UIM coverage pay? This insurance pays for damages in excess of the payment limits carried by the other driver in an accident where they are at-fault. If they have any insurance, your underinsured motorist coverage will cover an amount up to the limit of your coverage, minus whatever the other party's insurance pays. If they have no insurance, your UM/UIM policy will pay out up to the limit of your coverage, with no subtractions, other than any deductible you may have.

As you can see, having uninsured/underinsured motorist coverage makes sense, even when it's not legally required by your state. In fact, if you are a careful driver with an older car, you may be able to save money by dropping your collision coverage and keeping only your UM/UIM coverage and liability insurance intact. It's usually less expensive, but comes with a similarly low deductible.

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