Underinsured Motorist Insurance: Protecting Yourself on the Road

Driving is a daily necessity for many, but it also carries inherent risks. Accidents happen, and when they involve an at-fault driver with inadequate insurance coverage, you could face significant financial burdens. This is where underinsured motorist (UM) insurance comes in. Understanding underinsured motorist coverage is crucial for protecting yourself and your loved ones from devastating financial consequences after a car accident.

What is Underinsured Motorist (UM) Insurance?

Underinsured motorist insurance is a type of car insurance coverage that protects you and your passengers if you’re involved in an accident caused by an underinsured driver. “Underinsured” means the other driver’s liability coverage is less than the amount of your damages. This means their insurance policy might not fully cover your medical bills, lost wages, property damage, or other expenses resulting from the accident.

How Does Underinsured Motorist Coverage Work?

Your UM coverage steps in to cover the difference between the other driver’s liability limits and your actual losses. For instance, if you suffer $50,000 in damages, but the at-fault driver only carries $25,000 in liability coverage, your UM insurance would pay the remaining $25,000 (up to your UM coverage limit, of course).

Types of Underinsured Motorist Coverage

• Bodily Injury UM: This covers medical expenses, lost wages, pain and suffering, and other related costs for you and your passengers injured in an accident caused by an underinsured driver.
• Property Damage UM: This covers damage to your vehicle if the at-fault driver’s liability coverage is insufficient to repair or replace it.

Why is Underinsured Motorist Insurance Important?

Many drivers carry the minimum amount of liability insurance required by their state, which may be far less than the actual cost of injuries or vehicle damage in a serious accident. Even with good driving habits, you can’t control the actions of others. A single accident with an underinsured driver could leave you with tens of thousands of dollars in medical bills and other expenses. UM coverage provides a crucial safety net in these situations.

Understanding Your Policy Limits

Your underinsured motorist coverage limits are the maximum amount your insurance company will pay under your policy. These limits are typically expressed as two numbers (e.g., 25/50/25). The first number represents the maximum amount for bodily injury per person, the second number represents the maximum amount for bodily injury per accident, and the third number represents the maximum amount for property damage. It’s crucial to choose limits that adequately reflect your potential financial exposure.

How to Choose the Right UM Coverage

Selecting appropriate underinsured motorist coverage requires careful consideration. Several factors influence this decision:

• Your Assets: Higher net worth often necessitates higher UM limits to protect your assets.
• Your Lifestyle: Those with higher incomes and more expensive vehicles may benefit from higher coverage.
• Your State’s Minimum Requirements: While your state might only require minimum liability insurance, it’s advisable to choose UM coverage that exceeds the minimum.
• Your Risk Tolerance: Consider your comfort level with the potential financial burden of an accident involving an underinsured driver.

The Claim Process for Underinsured Motorist Coverage

Filing a claim under your UM coverage generally involves these steps:

1. Report the Accident: Contact the police and your insurance company immediately after the accident.
2. Gather Evidence: Collect information from all parties involved, including contact details, insurance information, and photos of the accident scene and vehicle damage.
3. File a Claim: Submit a formal claim to your insurance company, providing all necessary documentation.
4. Cooperate with the Investigation: Your insurer may require you to provide additional information or attend a medical examination.
5. Negotiate a Settlement: Your insurance company will work to negotiate a fair settlement with you based on your policy limits and the extent of your damages.

Uninsured Motorist vs. Underinsured Motorist

It’s important to distinguish between uninsured and underinsured motorist coverage. Uninsured motorist (UM) coverage protects you if you’re involved in an accident with a driver who has no insurance at all. Underinsured motorist (UIM) coverage, as discussed extensively, protects you if the at-fault driver’s insurance is insufficient to cover your losses.

Frequently Asked Questions (FAQs) about Underinsured Motorist Insurance

Q: Do I need both Uninsured and Underinsured Motorist coverage?

While not always legally mandated, it’s highly recommended to carry both uninsured and underinsured motorist coverage. This provides comprehensive protection against drivers with inadequate or no insurance.

Q: How much UM coverage should I buy?

There’s no one-size-fits-all answer. The ideal amount depends on your individual circumstances, including your assets, income, and risk tolerance. Consulting with an insurance professional is advisable to determine appropriate coverage limits.

Q: Will my UM claim affect my insurance premiums?

Filing a UM claim may impact your premiums, but the extent of the increase depends on your insurer and your specific circumstances. It’s generally better to have the coverage and potentially pay slightly higher premiums than to face significant financial hardship from an accident.

Q: What if the other driver’s insurance company disputes liability?

If the other driver’s insurance company denies liability, your UM coverage will step in to handle the claim process. Your own insurance company will investigate the accident and determine liability.

Q: Can I sue the at-fault driver even if I have UM coverage?

You may still choose to sue the at-fault driver, even if you use your UM coverage. Your UM insurer may have a right of subrogation, meaning they can pursue recovery from the at-fault driver after settling your claim.

Conclusion

Underinsured motorist insurance is a vital component of a comprehensive auto insurance policy. It offers critical protection against the financial devastation that can result from accidents involving at-fault drivers with insufficient insurance. By understanding your coverage and choosing appropriate limits, you can significantly reduce your financial risk on the road. Review your policy regularly and consult with an insurance professional to ensure you have adequate underinsured motorist protection.