What Is an Underinsured Motorist Endorsement?
In the insurance industry, an underinsured motorist endorsement is a vital form of supplemental insurance commonly added to an automobile insurance policy. Its main objective is to offer additional protection to the policyholder if an accident occurs where the at-fault driver’s insurance is insufficient to cover all the accident-related costs.
Key Takeaways
- An underinsured motorist endorsement is a type of supplemental auto insurance.
- It shields drivers from the risk that the at-fault driver may not have enough coverage to settle their claim.
- These endorsements are mandatory in numerous states and typically span six to twelve months.
How Underinsured Motorist Endorsements Work
Drivers generally purchase auto insurance to mitigate risks such as vehicle damage in an accident, damage to another person’s car, or causing injury or death to another individual. However, a frequently overlooked risk is the chance of encountering an at-fault driver who lacks adequate auto insurance.
If the at-fault driver doesn’t have enough assets or insurance, the victim may find it impossible to secure appropriate compensation. In such cases, the at-fault driver might declare bankruptcy, leaving little for the victim.
To safeguard against this situation, drivers can integrate underinsured motorist endorsements into their auto insurance policies. This supplementary insurance covers property damages, bodily injuries to the policyholder, and injuries suffered by insured family members or passengers. Should a claim arise, the endorsement bridges the gap between the at-fault driver’s coverage and the total owed amount.
For instance, if the at-fault driver has no insurance or assets, the endorsement will shoulder covering the whole claim, up to the policy’s maximum coverage level.
In numerous states, purchasing underinsured motorist endorsements is legally required, though it may go by different names. Sometimes, this coverage only activates when the at-fault driver has no auto insurance at all, as opposed to covering the shortfall between their coverage and the claim amount.
Though insurance requirements differ state-to-state, underinsured motorist endorsements usually last from six to twelve months and are renewable. The associated insurance premiums can vary based on factors like the policyholder’s age, driving experience, and claims history.
Real-World Example of an Underinsured Motorist Endorsement
Let’s illustrate with an example: Driver A and Driver B are involved in an accident where Driver A is at fault. The total damages amount to $175,000. However, Driver A’s insurance coverage is only $100,000. Fortunately, Driver B has an underinsured motorist endorsement.
Consequently, Driver A’s insurance covers the available $100,000, while Driver B’s endorsement covers the remaining $75,000. Thanks to the underinsured motorist endorsement, Driver B receives the full $175,000 to recover from the accident.
Related Terms: auto insurance, insurance premium, endorsement, bankruptcy, bodily injury, property damage
