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Underinsured Motorist Coverage

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Many drivers often choose the cheapest liability insurance possible when insuring their car. As a result, when they get into an accident, their insurance is not enough to cover all of the injured party’s medical expenses and property damage. Because of this, many people opt to purchase additional protection with underinsured motorist coverage. Underinsured motorist coverage helps protect you from having to pay out of pocket for accidents that you didn’t cause.

What is underinsured motorist coverage?

Also referred to as UIM, underinsured motorist coverage is additional coverage that helps cover your medical and property damage costs when you are in an accident with a driver who is underinsured. Liability is often not enough to cover the costs associated with a severe accident, and underinsured motorist coverage fills in the gaps.

It differs from uninsured motorist coverage because uninsured motorist coverage protects you from drivers who don’t have any liability insurance. Underinsured drivers have liability but don’t have enough to cover all of your post-accident expenses.

How does underinsured motorist coverage work?

Here is an example that highlights when underinsured motorist coverage would be beneficial:

In Virginia, the minimum liability is only 25/50/20— meaning $25,000 per bodily injury (or $50,000 total per accident) and $20,000 for property damage. You’ve bought a new Ford F-450 (with a price tag over $50k) when you get into a severe accident and are in the hospital for 5 days before you’re able to go home.

Your hospital bill easily exceeds $25,000, and the $20,000 you receive for property damage leaves you $30,000 shy of covering your new Ford F-450. Luckily, you have underinsured motorist coverage that covers your remaining expenses. If you didn’t have underinsured motorist coverage, you would have two choices: do nothing and pay for everything out of pocket, or sue the guilty party and hope they have the assets to cover your expenses.

What does underinsured motorist policy cover?

Underinsured motorist coverage protects you in two ways:

  1. It covers medical costs. Whether you are driving alone or you have a car load of people with you at the time of the accident, UIM will pay for any remaining medical costs after the at-fault driver’s liability coverage dries up.
  2. It covers property damage costs. Regardless of whether it’s your car or home, underinsured motorist coverage will help pay for the repair or replacement of any property damaged by an underinsured driver.    

Underinsured motorist bodily injury coverage

Medical expenses, lost wages or any other type of injury-related expense is covered by bodily injury coverage. You, your family and any other passenger or driver is protected with your policy.

Underinsured motorist property damage coverage

Any damages done to your car that aren’t covered by the at-fault driver’s insurance will be covered by your UIM policy.

Underinsured motorist coverage 

The limits of underinsured motorist insurance depend on your policy. If you live in a state that mandates you have UIM, you will need to purchase your state’s minimum requirements. As a general rule of thumb, however, you should always purchase as much as you can comfortably afford.

What does underinsured motorist coverage not cover?

Underinsured motorist coverage does not protect your car from hit-and-run accidents. Should your car be damaged in a hit-and-run, you will need collision coverage.

It also doesn’t protect you from yourself—in other words, it doesn’t cover anything if you are the one at fault.

Is underinsured motorist coverage required?

Currently, underinsured bodily injury coverage is required in the following states:

  • Connecticut
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • Nebraska
  • New Jersey
  • North Carolina
  • North Dakota
  • Oregon
  • South Dakota
  • Vermont
  • Virginia
  • Wisconsin

And underinsured motorist property damage is required in:

  • Maryland
  • New Hampshire
  • Virginia
  • Washington, D.C.

For the most part, tort states require underinsured motorist coverage. This is because if you don’t have this type of protection, you typically have to sue to get any additional compensation after the accident. However, if the person doesn’t have any assets, suing won’t get you far.

Accidents are a simpler matter in at-fault states, where you are simply responsible for yourself and not the other person.

Do I need underinsured motorist coverage?

If you have collision insurance, you likely don’t need underinsured motorist coverage. With collision, it doesn’t matter what happens to your car because your insurance provider will pay for any damages to your car that occur. This includes whether you are in an accident with an at-fault driver or if you are the at-fault driver. It will also pay for any damages that occur where there isn’t even another car in the equation (example: backing into a tree).

With UIM, there has to be an at-fault driver. Consider underinsured motorist coverage to be a small segment of what collision covers. UIM still offers significant protection, but collision offers more.

How much coverage do I need?

If you’re in a state that mandates you have underinsured motorist coverage, you need to purchase at least your state’s bare minimum. Even if you aren’t, however, you will want to consider the following:

  • Maximum number of people you routinely have in your car
  • How much money you make in a day, week, and month
  • The value of your car
  • The amount of cars you insure

If you have a large family, you will want to purchase as much as you can comfortably afford. Unfortunately, there’s no average cost for hospital visits. Yes, you can estimate an in-and-out ER visit, but your hospital visit may not stop there. You can’t assume you won’t need to go into intensive care afterwards or need physical therapy.

On a similar note, you also need to calculate how much money you (and possibly your spouse) make in a day, week and month. It’s easy to miss work because of a car accident. Whatever amount you make should also be calculated into your coverage.

When it comes to property damage, look how much your car is worth (we suggest using Kelley Blue Book). You will also need to consider your loan amount if you’re making payments. Does your state’s minimum liability cover your loan amount and car value? If not, purchase as much as you need so there isn’t a gap.

Lastly, you may want to consider a stacked insurance policy. A stacked insurance policy increases your UIM limits in relation to the amount of vehicles you insure— meaning it allows you to combine coverage amounts for each vehicle should get into a severe accident with an underinsured driver. With an unstacked insurance policy, you can’t do this.

The cost of uninsured motorist coverage

The cost of uninsured motorist coverage varies state by state and how much protection you want.

Is it worth it? Yes, especially if you live in a tort state. Taking someone to court is always an option to recoup any damages, but consider this: If the person had any assets for you to claim, they likely wouldn’t have purchased only the minimum.

The takeaway: 

  • Many people drive with only the minimum required amount of insurance.
  • Underinsured motorist coverage extends your medical and property protection
  • UIM is ideal for large families and new car owners.

No matter what state you live in, consider purchasing underinsured motorist coverage. It protects your car, but most importantly, it protects you and your family.

Lauren Ward

Lauren Ward is a writer for Coverage.com. She specializes in all things personal finance, including insurance, loans, and real estate.

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