Why You Should Consider Uninsured and Underinsured Motorist Coverage

Being involved in a car accident is a stressful experience, but it becomes even more challenging if the other driver has little to no insurance coverage. While minimum basic liability insurance is legally required in most states, some drivers either break the law or carry insufficient coverage to pay for damages.

This is why uninsured motorist (UM) and underinsured motorist (UIM) coverage can be valuable additions to your auto insurance policy. Below, we’ll explain the key differences between these coverages, why they are important, and how to determine the right coverage amount for your needs.

What Is Uninsured Motorist (UM) Coverage?

Uninsured motorist coverage protects you financially if you are in an accident caused by a driver who does not have insurance. Normally, the at-fault driver’s insurance would pay for damages, but if they are uninsured, you might otherwise need to take legal action to recover compensation. With UM coverage, your own insurance company steps in to cover your costs.

Depending on your policy limits, UM coverage may include compensation for:

• Medical expenses
• Lost wages
• Pain and suffering
• Property damage

Some states require uninsured motorist coverage, particularly those that follow contributory negligence laws. It is essential to review your state’s specific requirements to determine whether UM coverage is mandatory for you.

What Is Underinsured Motorist (UIM) Coverage?

Underinsured motorist coverage applies when the at-fault driver has insurance but does not carry enough coverage to fully pay for the damages caused in an accident. This coverage is especially useful in cases where the driver has only purchased the minimum liability coverage, which may not be enough to cover medical expenses or significant property damage.

UIM coverage typically helps pay for:

• Additional medical expenses beyond the at-fault driver’s policy limits
• Long-term care or rehabilitation costs
• Lost income due to serious injuries

Many states that require uninsured motorist coverage also mandate underinsured motorist coverage. It’s important to check your state’s laws to see if UIM coverage is required where you live.

Key Differences Between UM and UIM Coverage

While both uninsured and underinsured motorist coverages provide financial protection, they apply in different situations:

Uninsured Motorist (UM) Coverage:

• The at-fault driver has no insurance.
• Covers medical bills, lost wages, pain and suffering, and possibly property damage.
• Required in some states and optional in others.
• Applies in hit-and-run accidents and collisions with uninsured drivers.

Underinsured Motorist (UIM) Coverage:

• The at-fault driver has insurance but not enough to cover the full extent of damages.
• Covers additional medical expenses, long-term care costs, and lost wages.
• Typically optional but required in some states.
• Applies when damages exceed the at-fault driver’s insurance limits.

Given their similarities, UM and UIM coverages are often sold as a bundle, which may provide cost savings. If purchased separately, uninsured motorist coverage is generally considered more critical since it protects you in cases where the other driver has no coverage at all.

Why You Should Consider UM/UIM Coverage

If UM and UIM coverage are not required in your state, you may be wondering if they are worth the cost. According to the most recent studies, approximately 14% of drivers in the U.S. are uninsured. This means that in the event of an accident, there is a significant chance the other driver may not have any coverage.

Even in cases where the at-fault driver is insured, many states have low minimum coverage requirements, which may not fully cover medical bills and repairs. Adding UM/UIM coverage can help ensure you are not left paying out-of-pocket for someone else’s mistake.

How to Choose the Right UM/UIM Coverage Amount

When selecting the appropriate coverage amount, consider the following factors:

• Estimated medical expenses for potential injuries.
• Potential lost wages if an injury prevents you from working.
• The cost of repairing or replacing your vehicle.
• Insurance company recommendations for minimum vs. optimal coverage.
• Your balance between affordability and adequate protection.

There is no universally correct amount of UM/UIM coverage—it depends on your financial situation and risk tolerance. However, purchasing too little coverage could leave you vulnerable to large out-of-pocket expenses in the event of an accident.

Stay Protected on the Road

Uninsured and underinsured motorist coverage can provide critical financial protection if you are involved in an accident with a driver who lacks sufficient insurance. The first step in determining your needs is to check your state’s insurance laws.

If UM and UIM coverage are not required, weigh the benefits and costs to decide whether adding these coverages to your policy is the right choice for you.

For personalized advice, consider speaking with your insurance provider or an attorney familiar with your state’s insurance regulations.