Explaining Uninsured & Underinsured Motorist Coverage and Why You Need It

“If you’re buying an umbrella policy so that you can cover the injuries of strangers, wouldn’t you want to do the same for your family, instead of blindly relying on someone else to cover your injuries…”

Let’s face it: Auto insurance can seem complicated. Most states require you to have at least some coverage (typically a certain amount of liability), but then there’s a whole slew of other coverages to consider, too – comprehensive, collision, roadside assistance, rental reimbursement.

Then there’s uninsured motorist coverage and underinsured motorist coverage.  In my experience, these are the most misunderstood auto insurance coverages of all. However, they can make a big difference in some key situations.

What Is Uninsured & Underinsured Motorist Coverage?

This coverage protects you (the insured) from owners or drivers of vehicles who do not have insurance or the assets to compensate people who suffer a loss through their negligent ownership, maintenance, or use of an “uninsured motor vehicle.”

Why You May Need Uninsured Motorist or Underinsured Motorist Coverage

• Another driver causes an accident, damaging your vehicle and perhaps injuring you, but doesn’t carry any insurance coverage.
• The driver responsible for the accident doesn’t carry enough insurance to pay for all of the damage you incur. Hence your would have to pay the remaining car repair and medical costs.
• The at-fault driver has insurance, but the carrier is financially unable to pay the claim.
• You’re involved in a hit-and-run accident (state laws vary here).

So, you see, uninsured motorist and underinsured motorist coverage can come to your aid in many instances. Yet, given the chance, many drivers still bypass the coverage, and their reasons for doing so are oftentimes based on some common misconceptions. So, let’s clear those up.

Misconception 1
“Uninsured motorist and/or underinsured motorist coverage will make my car insurance too expensive.”

Yes, you will save money by not purchasing these coverages. But, for how long? If you encounter one of the above scenarios and find yourself paying for medical bills and car repairs out of your own pocket, you’re no longer saving money. If it’s a serious accident, your costs could be catastrophic.

Misconception 2
“I have health insurance, so I don’t need uninsured or underinsured motorist coverage.”

Great – it’s important to have health insurance. But, will it pay for lost wages and long-term care stemming from an auto accident? Likely not. In fact, your carrier may prohibit your health insurance from being used as primary coverage in the case of an auto accident. If so, you may need to first exhaust your auto insurance coverage before you’re eligible for benefits from your health insurer. Your health insurance deductible is also something to consider. If it’s high, you could elect to pay your auto deductible and use your uninsured motorist or underinsured motorist coverage, when applicable, instead.

Misconception 3
“I don’t want to be over-insured. I’ll just purchase the minimum car insurance my state requires.”

When you follow state requirements for purchasing car insurance, you typically end up only buying coverage to pay for other people’s injuries and car repairs, not your own. So, in many instances, only buying the minimum can leave you underinsured.

Misconception 4
“If the other driver is at-fault, I can rely on his/her insurance carrier to cover my costs.”

Ideally, yes. Unless you’re involved in one of the four scenarios outlined above. Then you may only have your insurance to rely on. That’s why it’s important to make sure it’s enough.