What exactly is underinsured motorist coverage?

Aug 2, 2023 | Business Insurance, Personal Insurance

If you are hit by an uninsured driver, underinsured motorist coverage will help pay your expenses. Uninsured and underinsured motorist coverages are bundled together as a single coverage on your auto policy in some states.

Each state has its own definition of “underinsured.” Typically, it is a driver who does not have enough insurance to cover the damages of another person if he or she is found to be at fault in an accident. For example, an uninsured driver may have auto liability insurance

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two types of uninsured and underinsured motorist coverage.

Uninsured and underinsured motorist coverage, like liability insurance, is divided into two types: bodily injury and property damage.

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Uninsured/underinsured motorist bodily injury (UMBI/UIMBI) coverage

Uninsured/underinsured motorist bodily injury insurance is intended to cover you and the people in your car for medical bills, lost wages, and pain and suffering if you are involved in an accident caused by someone who does not have insurance or has insufficient insurance.

Medical payments (Med Pay) or personal injury protection (PIP) coverage may not be sufficient to keep drivers from needing UMBI or UIMBI. Remember that if you are injured by an uninsured driver, UMBI or UIMBI may provide higher limits than either.

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Property damage coverage for uninsured/underinsured motorists (UMPD/UIMPD)

Uninsured motorist property damage (UMPD) and underinsured motorist property damage (UIMPD) insurance policies are designed to protect your vehicle if someone hits you and does not have insurance or enough insurance.

Assume that another driver causes a three-car accident. The damage is significant, and the responsible driver is either uninsured or has inadequate coverage. Up to the policy limits, these coverages may help cover the remaining repairs. They may also assist in the payment of a collision deductible, rental car costs, or other out-of-pocket expenses.

These coverages are required in some states and are automatically included for each vehicle on the policy. In other states where coverage is available but not required, you must add it separately for each vehicle on your policy if you want it for all vehicles on your policy.

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How does stacking work?

You may be able to “stack” your uninsured and underinsured bodily injury coverage if you have more than one car on your policy.

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Is uninsured motorist coverage required?

Uninsured motorist coverage, also known as UM coverage, is not required in all states. Even if UM coverage isn’t required in your state, driving without it puts you at serious risk. According to the Insurance Information Institute, nearly 13% of all drivers in the United States lack auto insurance. Uninsured drivers account for more than 20% of all drivers in some states.

If you are injured or your vehicle is damaged in an accident caused by an uninsured or underinsured driver, you may be forced to pay for medical bills or vehicle repairs out of your own pocket. Even if you file a claim under your own policy, you may have a high collision deductible or insufficient medical payments/personal injury protection to cover injuries to you or your passengers.

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Which states require uninsured/underinsured motorist coverage?

While not all states require uninsured and underinsured motorist coverage (UM/UIM), roughly half do, and some may only require you to purchase bodily injury coverage. If uninsured and underinsured motorist coverage is available in the state, it may be available for purchase.

Illinois, for example, requires both uninsured and underinsured motorist coverage. Car insurance is one of several options for demonstrating financial responsibility in New Hampshire, but if it is purchased, the state requires both uninsured and underinsured motorist coverage to be included on every policy. Other states, such as Massachusetts and South Carolina, only require coverage for uninsured motorists.

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What does uninsured motorist coverage provide?

Uninsured/underinsured motorist insurance protects you, your passengers, and your vehicle if you are hit by a driver who does not have enough or no auto insurance coverage. Uninsured/underinsured motorist insurance may be separate, combined, or comprise up to four coverages depending on your state:

If you are hit by a driver who does not have insurance Uninsured motorist bodily injury (UMBI) coverage may cover medical expenses for both you and your passengers.

Uninsured motorist property damage (UMPD) may cover vehicle damage.

It should be noted that while some states may require a deductible for UMPD/UIMPD, UMBI/UIMBI generally does not.

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Does uninsured motorist coverage extend to hit-and-run accidents?

Yes. If a driver hits your car and flees, you can file a claim for uninsured motorist coverage under your policy. However, in some states, uninsured motorist property damage (UMPD) coverage does not cover hit-and-run incidents. In this case, collision coverage on your insurance would be required to cover the damage to your vehicle caused by a hit-and-run driver.

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Property damage caused by an uninsured motorist versus collision coverage

Uninsured motorist property damage (UMPD) and collision coverage both pay for damage caused by a driver who does not have — or does not have enough — insurance. However, collision coverage only pays for damage to your car, regardless of who is at fault, whereas UMPD may cover damage to both your car and other property caused by an uninsured or underinsured driver, depending on your state.

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Is uninsured motorist bodily injury coverage really necessary if I have health insurance?

Your health insurance coverage may overlap with that of UMBI and UIMBI. Before passing on the coverages in states where UMBI and UIMBI are optional, there are a few things to consider:

Will your health insurance cover injuries from a car accident? 

Medicare and Medicaid may not pay out until all other insurance options have been exhausted. If you have private health insurance, check with your provider to see if medical expenses incurred as a result of a car accident are covered.

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Is there a deductible on your health insurance? 

There is typically no deductible with UMBI and UIMBI. If you have a high deductible on your health insurance, it may be beneficial to carry UMBI and UIMBI.

Will you be transporting passengers who do not have their own health insurance? 

Those passengers will be covered by your UMBI and UIMBI coverage.

Is your health insurance going to cover lost wages? Your UMBI and UIMBI may cover this, as well as other types of damages not covered by some health insurance policies.

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How much uninsured motorist protection do I require?

You are usually able to select the insurance limits of your coverage. Consider matching the amount of your liability coverage for the bodily injury portion that covers your injuries. Some states give you no choice but to select identical limits.

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