Do I Need Underinsured Motorist Coverage?

What happens when you're in an auto accident, and the other driver's insurance plan will not cover all of the expenses related to the crash? If you have underinsured motorist coverage (UIM), you won't need to be too concerned. If you do not have UIM, you may want to consider getting it.

Continue reading to learn about the different types of UIM coverage, including limitations and where to go if you have specific legal questions.

Let's Talk Basic Uninsured Motorist Coverage

First of all, UIM insurance is not uninsured motorist coverage but rather a part of it. Uninsured coverage kicks in when you have an accident with a driver who lacks any insurance, while underinsured motorist coverage is meant for situations where the at-fault driver has insurance but not enough insurance to cover your damages.

When you are pricing out your car insurance coverage with your insurer, be sure to ask about this policy type and the different levels. Why? UIM is part of this larger, three-part auto insurance coverage type known simply as "uninsured motorist" (UM) coverage. In many states, UM coverage consists of:

• Underinsured Motorist insurance
• Uninsured Motorist insurance
• Uninsured Motorist Property Damage insurance (UMPD)

Keep in mind that underinsured, uninsured, and UMPD coverage plans are not required in all states. The same is true of basic minimum liability coverage. Be sure to check the insurance laws in your state to learn more.

Underinsured Motorist Insurance Coverage Defined

Underinsured motorist coverage becomes an important tool when you have a car accident, and it's the other driver's fault. Here, the at-fault driver does have car insurance, but their policy limits aren't enough to pay out all your expenses. You can attempt to sue this driver for the balance in a personal injury lawsuit.

However, if the at-fault driver doesn't have assets from which to draw your damages award—assuming you win the lawsuit—you won't be able to collect. Underinsured motorist coverage effectively helps prevent that shortfall. It provides compensation to you for the difference up to your own policy limits. This only applies if your underinsured driver coverage is greater than the negligent driver's policy limits.

Uninsured Motorist Insurance Coverage Defined

When you purchase uninsured motorist insurance, you are buying coverage to protect yourself from damage caused by other drivers who do not carry any car insurance. The specific damages here are:

• Medical expenses
• Lost wages
• Pain and suffering damages

Underinsured Motorist Property Damage Insurance Coverage Defined

This type of coverage applies to property damage that occurs as a result of a car accident with an uninsured motorist. This includes your car repairs and even personal property inside your vehicle under some policies. It also applies to underinsured drivers as well.

Medical Bills and Health Insurance

In an accident, you could potentially have substantial medical expenses, even if you're not at fault. Your health insurance may cover these expenses. But often they may want to be reimbursed if you receive a settlement from the other party's insurance or your UIM coverage. If your UIM insurance or the other driver's insurance doesn't cover all your medical expenses, your health insurance should cover the balance after deductibles and copayments.

Hit-and-Run Accident

Being the victim of a hit-and-run accident can be distressing, especially if you are left with injuries and damages. Hit-and-run accidents can be particularly challenging because the at-fault driver often cannot be identified or located. This is where your Uninsured Motorist Bodily Injury (UMBI) coverage can be crucial. UMBI can cover your medical bills, lost wages, and pain and suffering if you are hit by a driver who flees the scene and cannot be identified.

In the case of a hit-and-run, you should report the incident to the police as soon as possible. An official police report can help when you make a claim with your insurance company. It's often required for UMBI claims.

Premiums, Deductibles, and Coverage Limits

The cost of UIM coverage will depend on the coverage limits you select. A higher limit means the insurance company will cover more expenses. But your premiums will be higher. A deductible is the amount you must pay out of pocket before the insurance company will pay. Higher deductibles usually mean lower premiums. But you'll have to pay more upfront in case of an accident.

Collision Coverage and Property Damage Coverage

Collision coverage pays for the damage to your vehicle after an accident, regardless of who's at fault. Property damage coverage, on the other hand, is part of your liability insurance. It pays for the damage to the other party's vehicle if you're at fault. UMPD can cover your vehicle damage if the other party is uninsured or underinsured.

Personal Injury Protection Coverage

Personal injury protection (PIP) coverage, or "no-fault" insurance, covers medical expenses and lost wages for you and your passengers, no matter who is at fault for the accident. PIP is mandatory in some states and optional in others. It can be particularly helpful if you have high medical expenses and need immediate coverage.

Because PIP coverage is designed to be paid out quickly without the need to determine fault, it can offer immediate financial relief for unexpected medical bills or lost income. However, the speed and ease of payout comes with a downside. PIP often requires you to waive your right to sue the other driver for pain and suffering, except in severe cases. This is why it's also known as "no-fault" insurance.

It's also important to note that personal injury protection coverage is not available in all states. Some states have mandatory PIP coverage, while others have it as an optional add-on. Some states don't offer PIP at all. They instead use a tort system, where the at-fault driver is responsible for paying for injuries and damages.

Liability Limits and Bodily Injury Liability

Bodily injury liability is part of your liability coverage. It pays for the other party's medical expenses if you're at fault. Each policy has a limit on how much it will pay for each person and each accident. If you are at fault and the other party's medical expenses exceed your liability limit, you could be held responsible for the balance.

The per-accident limit is the maximum amount the insurance company will pay for all injuries in a single accident. For example, if your policy states "50/100", your insurer will pay a maximum of $50,000 per person and $100,000 total for all injuries in a single accident.

If the costs exceed these limits, you will be personally responsible for paying the balance. This can create a significant financial burden.

Should I Purchase UIM?

While we can't tell you what insurance policy is best for you, we can strongly suggest that you consider purchasing some form of UIM coverage from your insurance company. You particularly should consider this if you live in a state known for having a high rate of uninsured drivers or a state with lower mandatory minimum liability coverage.

Even when at-fault drivers carry the basic minimum amount of liability coverage, it may not be enough to cover all your expenses. Don't get left paying for injuries and damages that aren't your fault. Speak with a knowledgeable personal injury lawyer about insurance information and policy limit amounts to learn more.

Underinsured Motorist Coverage: Related Resources

Consider reviewing the following resources for more information about automobile insurance plans and related legal issues:

• Single Car Accident: Am I Always at Fault?
• Contributory and Comparative Negligence
• Fault and Liability for Motor Vehicle Accidents

Confused About Underinsured Motorist Coverage? Speak With a Car Accident Lawyer About Your Claim

Are you still a little confused about underinsured motorist coverage? You don't need to worry. Auto insurance policies can be confusing for most people. If you have additional questions about insurance claims or liability insurance coverage, it's wise to speak with a skilled personal injury attorney who handles motor vehicle accidents.