Underinsured motorist coverage is added to your auto insurance policy. It protects you if you are in an accident involving someone who does not have sufficient insurance. In the event of an accident, the insurance of the person at fault is supposed to compensate the other injured party. If the offending party’s policy has a lower limit on the cost of damages, the injured party’s underinsured motorist coverage would cover the rest.
Underinsured coverage is not the same as uninsured coverage, which covers cases in which the at-fault driver has no insurance, although the two types can be grouped. A handful of states require underinsured motorist coverage, while others require uninsured motorist coverage.
Key points to remember
- Underinsured motorist coverage protects in the event of an accident in which the at-fault driver does not have enough insurance to cover all of the damage.
- This type of coverage is a relatively inexpensive addition to a regular car insurance policy and can prove beneficial in the event of an accident.
- A few states require drivers to have underinsured motorist coverage, while a higher amount requires uninsured motorist coverage.
Understanding Underinsured Motorist Coverage
When one person has an accident that is not their fault and the other motorist does not have enough insurance to cover the damage, underinsured coverage kicks in. Once you file a claim from your provider, they will contact the other driver’s insurance for payment. If the other driver did not have enough insurance to cover your expenses adequately, the underinsured coverage would satisfy, up to your policy limit.
For example, suppose you have medical and auto damages totaling $200,000. The other driver has insurance to cover only $100,000. You can claim the balance from your insurer, within the limits of your policy coverage. You cannot claim more than the actual costs that you owed directly as a result of the accident.
Some insurers will have a limit on how long you can wait before filing your underinsured claim. These limits vary by company and can be as short as 30 days. As the insurance company settles your claim, they will want copies and bills of all medical treatment received and any auto repairs resulting from the event. If the insurer decides that the costs submitted with the claim are unnecessary or unrelated to the accident, it will disallow these amounts. If the policyholder disagrees with the insurer’s decision, the matter will usually go to binding arbitration.
Your ability to sue an uninsured or underinsured driver depends on the laws in your state.
Benefits of Underinsured Motorist Coverage
Coverage for underinsured motorists is usually a relatively inexpensive addition to the cost of your car insurance policy, but can prove beneficial if you are in an accident where the driver who was convicted does not have enough. . insurance to cover the cost of damage caused by the accident. It happens far more frequently than you might imagine: One in eight American drivers on the road is uninsured, reports the Insurance Research Council.
Even if someone has coverage, they may only have purchased the minimum amount required by the most basic state, which varies from state to state. New Hampshire and Virginia are the only US states that do not require a minimum amount of auto insurance coverage. However, all states have financial liability laws, so where there is no insurance requirement, there is a legal obligation to prove to you that you can pay for the damages if you cause an accident.
Different types of coverage for underinsured motorists are available from most insurers. Some coverages will include bodily injury and some will cover property damage, while others will cover both costs.