What is Underinsured / Uninsured Motorist Coverage?

Being a conscientious and responsible driver, you purchase auto insurance to protect yourself in case of an accident. Other drivers may not feel the same way. The amount of uninsured drivers on the road is actually quite surprising. According to the Insurance Information Institute 13 percent, or one out of every eight drivers, is uninsured. If you are hit by one of these drivers and don't have underinsured/uninsured motorist coverage on your car insurance policy, you may be at risk financially.

For example, if you are driving around town and a 19-year-old driver without insurance t-bones your car, you may be on the hook for your medicals bills and other expenses. This type of scenario plays out across the country daily. The best way to protect yourself from this financial hit is with underinsured/uninsured insurance which is very affordable and can be easily added to your policy.

What Exactly is Under/Uninsured Motorist Coverage?

Uninsured motorist coverage will help protect you financially from injuries sustained as a result of an underinsured negligent driver. This a driver that does not have any insurance, does not meet the state minimum liability insurance limits as mandated by the state, or whose insurance denies their claim or they do not have the financial means to pay the claim. Uninsured motorist coverage will also protect you in the case of a hit and run but only as it pertains to bodily injury (UMBI) and not property damage (UMPD).

Underinsured motorist insurance protects you in the event you sustain injuries or damages from an at fault driver that is only carrying the state minimum liability insurance required. In many cases, this isn't much insurance at all. If you sustain serious injuries from a driver that is carrying state minimums, it is very possible their available insurance benefit won't cover your medical expenses. If you are in an accident with an “at fault” driver that lacks proper liability coverage, your own underinsured motorist coverage will cover you.

Let's break down the definition of uninsured/underinsured motorist coverage a little more.

Uninsured Motorist (UM) Coverage for Uninsured Motorist Bodily Injury (UMBI)

UMBI can pay for injuries to people that are protected under your insurance policy, this includes family members in other vehicles and passengers that are in your insured vehicles, as a result of car accident caused by an uninsured driver. UMBI will cover medical bills, and may also cover lost income and pain and suffering.

Uninsured Motorist (UM) Coverage for Property Damage (UMPD)

UMPD can pay for damages your vehicle sustains from an accident caused by an uninsured driver that you can identify. UMPD almost never covers damages caused by a hit and run driver. If you have collision coverage on your insurance policy already, it may not be worth it to carry UMPD since it usually pays your collision deductible only. UMPD is not available in all states. When the term UM is used, it refers to bodily injury coverage and not property damage.

Underinsured Motorist (UIM)

Underinsured Motorist pays for injuries in much the same way UMBI does. An at fault driver that carries state minimum liability insurance may not be able to cover a claim in the event of a serious accident. UIM coverage will protect you in the event that the at-fault driver's insurance does not cover all of your damages.

Depending on which state you are in, UM and UIM can be bundles together as coverage. In other states these coverages can be purchased separately.

Do I Really Need Uninsured Motorist Coverage?

In short, yes. In some states uninsured motorist coverage is a requirement and in other states, there is a high rate of uninsured drivers on the road.

In every state except New Hampshire, some type of auto insurance is required. That doesn't mean that everyone abides by these rules. The Insurance Research Council reports that in 2015, 13% of drivers nationwide were driving with no insurance coverage. This comes out to 29.7 million people on the road uninsured. Florida has the highest rate of uninsured drivers at 26.7%.

If you are hit by an uninsured driver, you can be left paying for your own injuries, vehicle damages and court expenses if you go into litigation. The easiest way to mitigate this scenario is to carry uninsured motorist coverage on your auto insurance and make a claim through your insurance company for any damages.

Is Carrying Uninsured Motorist and Uninsured Motorist Bodily Injury Coverage Required?

No, it's not always required but it a good idea to have based on the numbers discussed above and the fact that it doesn't add that much to your monthly insurance premium.

There are some states that require UM and UMI coverage but for the majority of states it is not required. To find out what your state's mandates require, you should contact your insurance agent for more information.

How Much Will Uninsured Motorist Coverage Cost?

On average UM/UMI coverage is about 5% of the total cost of your annual auto insurance premium. If, for example, you pay $800 for your annual insurance premium, adding uninsured motorist coverage will cost you an additional $40 per year. Please note that the cost will fluctuate based on factors such as ticket history, policy discounts and any prior claims on your auto insurance.

Since there are so many factors that can effect the price, it's always best to call your insurance agent for a concise number.

What are the average coverage limits?

As with most elements of your insurance policy, you can pick from a wide array of coverage options. Options may vary depending on the state and insurance carrier but limits can be as low as $5,000 and go as high as $1 million or more.

It's generally a good idea to pick a UM limit that closely mirrors your bodily injury limit. For example, if you have a bodily injury limit of $300,000 on your auto insurance then you should carry the same for your UM limit.

Most UM/UIM are typically split limits, written in much the same your liability limits are written. If your coverage is 100/300, this means your policy will pay out $100,000 per person and $300,000 per incident. You may have the option to purchase combined singe limits. This would provide you $300,000 of coverage in which you can split amount between one or multiple people.

For states that offer uninsured or underinsured motorist property damage coverage, you may have the choice to buy UM insurance as a split limit or combined single limit policy.

Here is a breakdown of split limit plans as opposed to combined single limit plans.

• Split limit plans - These plans have separate coverage levels for UMBI and UMPD. For example, they may be written as $50,000/$100,000/$25,000, providing coverage of $50,000 per person, subject to a maximum of $100,000 per accident for bodily injury and 25,000 for property damage.

• Combined single limit plans - These plans are offered in a small number of states, where one coverage level can pay for both UMBI and UMPD. For instance, a $100,000 policy will pay for up to that amount of UM claims, regardless of whether or not they are related to bodily injury or property damage. Combined single limit policies are more flexible, but split limit plans may be less expensive.

Can I Stack Uninsured Motorist and Uninsured Motorist Bodily Injury Insurance?

There are some states, but not all, that will allow you to stack uninsured motorist bodily injury and/or underinsured motorist bodily injury coverage. Stacking means that you can raise your limits by the number of vehicles you have in your household. You may pay a little more for the ability to stack coverage.

Below is an example of stacking coverage.

So let's say you have two cars in your household. Each one of your vehicles has an UMBI limit of 100/300. If you need to use your coverage, you and your passengers could receive $100,000 per person and your limits would top out at $300,000 per incident. If you decide to stack your coverage, your UMBI limit would now double to 200/600. If you have three cars in your household and you stacked coverage for all three, your UMBI coverage would now be 300/900.

There is generally no limit to the amount of vehicles that can be insured and UMBI coverages that can be stacked. If you have only one vehicle on your auto policy, stacking would be available but for a policy with multiple vehicles, stacking may be a perk.

Even if your state does allow stacking, your auto insurance company may not. It's always a good idea to talk to your insurance agent to see if your company allows stacking as an option.

So How Does This Whole Uninsured/Underinsured Motorist Coverage Thing Work?

If you live in a state with no-fault insurance laws, you may have to go to court for a judgement before you receive any UM or UMI benefits.

In other states it generally works like this:

You are hit be an underinsured motorist and collect their insurance information. You call the at-fault party's insurance company as soon as possible and file a claim. If you suspect the person who has hit you is underinsured, contact your insurance company to alert them to the situation. If the other driver's insurance company is unable to pay all of your claim (or the driver is uninsured), your insurance will open an investigation. Once your insurance has completed their investigation, you should receive compensation based on the limits of your policy, if it is deemed appropriate. (If you r insurance policy is 100/300 you will only receive $100,000 per person and $300,000 per incident regardless of the cost of the accident). There are states with comparative negligence. In this case your claim may be prorated based on the level of fault you are responsible for in the incident.

If your insurance company denies your claim or fails to offer you what you feel is a fair mount, you be able to take your claim to arbitration or take legal action.

As always it is important to talk to your insurance agent to find out the coverages, requirements and limits in your state.