Underinsured Motorist Coverage: What It Means For Your Auto Insurance

Underinsured motorist coverage is a type of auto insurance that covers you if the driver responsible for an accident doesn't have sufficient insurance to cover the damage they've caused. It is often sold alongside uninsured motorist coverage, which is similar but pays out when the at-fault driver doesn't have any auto insurance. Underinsured motorist coverage is required in almost a dozen states and optional in many others. It typically includes two parts: bodily injury coverage, which covers medical bills and may cover lost wages, and property damage coverage, which covers the cost to repair or replace your vehicle.

Underinsured Motorist Bodily Injury (UIMBI)

UIMBI can help pay for a range of costs related to your injuries, including hospital bills, medical care expenses, and lost wages if you're unable to work due to your injury. It may also cover replacement services, such as house cleaning or babysitting, that you're unable to perform due to your injuries.

UIMBI is designed to fill the gap when the at-fault driver's insurance is insufficient to cover your medical expenses. For example, if your medical bills total $20,000 following an accident with an underinsured driver, you would typically file a claim against their bodily injury liability coverage. However, if their coverage is insufficient, UIMBI would cover the difference, provided your limit is at least $20,000.

UIMBI is mandatory in some states and optional in others. Even if it's not required in your state, it's highly recommended, as it can provide valuable financial protection in the event of an accident with an underinsured driver. The cost of UIMBI varies but is generally very affordable, typically costing around 5% of your annual auto insurance premium.

When purchasing UIMBI, you can choose from different coverage levels. It's recommended to select a limit that matches your bodily injury liability insurance or is equal to your net worth. This ensures you have adequate protection in the event of a claim.

Underinsured Motorist Property Damage (UIMPD)

UIMPD is particularly relevant given that about one in eight drivers are estimated to be uninsured, and many others may have insufficient insurance coverage. In the event of an accident with such a driver, UIMPD can help cover the costs of repairing or replacing your vehicle and other damaged property.

The coverage provided by UIMPD is complementary to that of Uninsured Motorist Property Damage (UMPD). While UMPD covers accidents involving uninsured drivers, UIMPD steps in when the at-fault driver has some insurance but not enough to cover the damage they caused.

The availability and requirements for UIMPD vary by state. Some states require UIMPD to be included in car insurance policies, while others allow drivers to opt out in writing. Additionally, UIMPD may have coverage limits and deductibles that need to be considered. These limits and deductibles vary by state and insurance provider, so it's important to review the specifics of your policy or consult with your insurance provider.

UIMPD should not be confused with collision coverage. While collision coverage applies to any collision with another vehicle or object, regardless of fault, UIMPD specifically addresses accidents involving underinsured drivers.

When to File a Claim

If you've been in a car accident and the other driver was at fault, you could end up making a claim through the underinsured motorist provisions of your own automobile insurance policy. Underinsured motorist coverage will kick in when the at-fault driver doesn't have enough coverage to pay for your accident-related losses.

For example, suppose you are in a car accident and you incur $30,000 in medical bills and other injury-related losses. If the at-fault driver carries liability insurance with a policy limit of $20,000, the at-fault driver is underinsured. In this situation, you would need to make an underinsured motorist claim on your own auto policy.

Unlike a car accident with an uninsured motorist, it takes time to figure out whether the at-fault driver is indeed underinsured. You may quickly find out the limits of the at-fault driver's coverage, but it will take time to determine the nature and extent of your injuries and where the total picture of your losses fits within those limits.

If the at-fault driver only carries state-minimum liability coverage, and your injuries are severe, you may know pretty quickly that you'll need to make an underinsured motorist claim. However, if the at-fault driver has substantial liability coverage, it may be several months before you know you need to make an underinsured motorist claim.

Whether you're filing an underinsured motorist claim, the first thing to do is report the accident to your own insurance company. From there, it's a matter of figuring out some initial information about the crash, including the other driver's insurance status. Your insurance company can explain your options if it looks like you'll need to utilize your underinsured motorist coverage.

Starting an underinsured motorist claim can take time, as you first need to understand the full spectrum of your car accident injury-related losses, measured against the at-fault driver's coverage picture. Then, in order to trigger your underinsured motorist coverage, you'll probably need to collect the limits of the at-fault driver's liability coverage before your own insurer will accept your underinsured motorist claim.

How to File a Claim

To file an underinsured motorist claim, you will need to notify your insurance company as soon as possible and let them know that you intend to file a claim. You may also need to obtain a statement from the at-fault driver's insurance company detailing their coverage limits. It's important to act quickly, as some car insurance policies place strict deadlines when it comes to notification of potential claims.

Once you have determined that your losses exceed the at-fault driver's coverage limits, inform your insurer immediately that you intend to make an underinsured motorist claim. The process may involve an investigation into the accident, an examination of your medical records, and the compilation of other evidence and records that could affect the value of your claim and the payment of a fair settlement.

What to Expect After Filing a Claim

After filing an underinsured motorist claim, your insurance company will likely conduct an investigation to verify the details of the accident and the extent of your injuries. They may request and analyze your medical records and other evidence to determine the validity and value of your claim. This process can take several weeks to months, depending on the complexity of the case and the severity of your injuries.

It's important to note that your insurance company may not immediately pay your claim up to the limits of your underinsured motorist coverage. There may be negotiations involved to reach a fair settlement, especially if there are questions about the nature and extent of your injuries.

If you and your insurance company cannot agree on a settlement, the dispute may be resolved through arbitration rather than a lawsuit. Arbitration is a more informal process than a court trial, and the losing side typically has limited rights to appeal the decision.

Uninsured Motorist Property Damage (UMPD)

UMPD is mandatory in some states, optional in several, and unavailable in about half of all states. It is often combined with Uninsured Motorist Bodily Injury (UMBI) coverage, which pays for injuries sustained in a crash with an uninsured driver. This combination ensures protection for both your vehicle and your person.

UMPD covers repairs to your car and any extra costs if the other driver doesn't have enough property damage liability insurance. It can also cover damage to your home or other property. This coverage is especially useful if you do not have collision insurance, as it can help pay for repairs to your car if the costs exceed the other driver's property damage liability limits.

The amount of coverage provided by UMPD varies by state and insurer. In some states, UMPD will not cover a hit-and-run unless the driver is identified. Additionally, there may be a deductible for UMPD coverage, which is subtracted from the claim payout.

UMPD provides valuable protection, as approximately 1 in 8 drivers are uninsured, and many others have insufficient coverage. It ensures that you are not left paying out of pocket for repairs or medical expenses if you are in an accident with an uninsured or underinsured driver.

Uninsured Motorist Coverage Requirements

Uninsured motorist coverage is mandatory in many states and highly recommended for all drivers. This type of coverage can pay for medical expenses if you or your passengers are injured in an auto accident caused by:

• A driver with no liability car insurance.
• A hit-and-run driver.
• A driver whose insurance company denies coverage or goes out of business.

In some states, you can also buy uninsured motorist property damage (UMPD) coverage, which pays for damage to your car if an uninsured driver hits you. Collision coverage is another optional form of insurance available in every state that can cover vehicle damage, regardless of who is at fault.

Underinsured motorist (UIM) insurance is similar to uninsured motorist coverage but relates to accidents with drivers who have insufficient insurance to cover the costs of the damage they cause. UIM insurance is mandatory in some states and may be packaged with uninsured motorist coverage in others.

If your state requires uninsured motorist coverage, you must buy at least the state's minimum. This will typically be an amount that matches your liability coverage. For example, if your liability coverage limit is $100,000 for injury to one person, you would need to buy $100,000 of uninsured motorist coverage.

Some states allow you to reject uninsured motorist coverage in writing, and some states do not offer it at all.

Frequently asked questions