Underinsured motorist coverage is an essential component of auto insurance. It protects you if you’re involved in an accident caused by a driver whose insurance isn’t sufficient to cover the damages. Essentially, if the at-fault driver’s insurance limits fall short of your repair costs or medical expenses, and you have UIM coverage, your insurance provider will step in to cover the remaining amount.
The definition of “underinsured” and the specific workings of UIM coverage can vary by state. In some states, it’s mandatory, while in others, it may be an optional addition to your car insurance policy.
Underinsured motorist coverage differs from uninsured motorist coverage, which assists you in cases where the at-fault driver has no insurance.
Key Takeaways
- Comprehensive Protection: UIM coverage offers protection in accidents where the at-fault driver doesn’t have enough insurance to cover all damages.
- State Requirements: Some states mandate UIM coverage while others offer it as an endorsement.
- Distinct from UM Coverage: UIM is specifically for underinsured scenarios, while uninsured motorist coverage (UM) applies when the at-fault driver has no insurance.
How Underinsured Motorist Coverage Works
Imagine you’re involved in a car accident that wasn’t your fault. After ensuring everyone’s safety and exchanging information, you file a claim with your insurance company. When they contact the other driver’s insurer, they discover the liable party has only the minimum coverage, which won’t cover all your expenses. This is when your underinsured motorist coverage comes into play, covering the additional costs up to your policy limit.
UIM coverage typically includes two parts:
- Bodily Injury Coverage: Covers medical expenses and may also include lost wages.
- Property Damage Coverage: Covers repair or replacement costs for your vehicle.
Note that in some states, only bodily injury coverage may be available, and you can’t claim more than your actual expenses from the accident.
Benefits of Underinsured Motorist Coverage
Liability insurance, which covers damages when you’re at fault, is required everywhere. However, state minimums may fall short in serious accidents, leaving you with high out-of-pocket costs. This is where underinsured motorist coverage shines. If involved in an accident with an underinsured driver, your UIM coverage picks up the slack, up to your policy limits.
Additionally, some states and insurance providers allow “stacking” of UIM coverage limits across multiple vehicles on the same policy, potentially increasing your protection.
States Requiring Underinsured Motorist Coverage
Several states, including Connecticut, Kansas, Maine, Maryland, Minnesota, Nebraska, North Carolina, North Dakota, Oregon, South Dakota, and Vermont, mandate UIM coverage. Other states require it under specific conditions, like purchasing standard auto insurance policies.
What Is Covered by Underinsured Motorist Coverage?
UIM coverage often includes:
- Bodily Injury Coverage: Medical bills, potentially lost wages.
- Property Damage Coverage: Repair or replacement of your vehicle.
Both of these cover costs exceeding the at-fault driver’s insurance limits. Availability and requirements can vary by state, so it’s best to consult your local DMV or insurance agent.
Does Underinsured Motorist Insurance Cover Hit-and-Runs?
UIM typically does not cover hit-and-run incidents. Since the hit-and-run driver cannot be identified and is effectively an uninsured motorist, uninsured motorist coverage (UM) would generally apply. In some cases, collision coverage may be necessary. It’s best to verify with your insurance provider.
Bringing It All Together
Underinsured motorist coverage offers crucial protection if you’re in an accident with a driver lacking adequate insurance. While required in some states, it’s available as an optional endorsement in others and helps cover medical and property damage expenses when the at-fault driver’s insurance isn’t enough.
Related Terms: uninsured motorist coverage, liability insurance, collision coverage, bodily injury coverage, property damage coverage.
References
- Allstate. “Uninsured Motorist Coverage and Underinsured Motorist Coverage”.
- Nationwide. “Underinsured Motorist Coverage”.
- South Dakota Department of Labor and Regulation, Division of Insurance. “Automobile Insurance”.
- Progressive. “Car Insurance Requirements by State”.
- Allstate. “Stacked vs. Unstacked Car Insurance”.
- New Hampshire Insurance Department. “2022 Automobile Insurance Consumer Frequently Asked Questions”, Page 7.
- Rhode Island Department of State. “Uninsured and Underinsured Motorist Insurance (230-RICR-20-05-1)”, See 1.5.
- Illinois Department of Insurance. “Auto Insurance Shopping Guide”.
- New Jersey Department of Banking and Insurance. “New Jersey Auto Insurance Buyer’s Guide”.
- Progressive. “What Is Uninsured Motorist Coverage?”
