The Hidden Gem of Auto Insurance: Uninsured Motorist Coverage

States require that auto owners carry liability insurance. However, state minimum limits are usually low and inadequate to fully compensate for injuries and damages. Also, there are some people who drive without insurance and do not have the financial resources to pay for an at-fault accident.
This leaves people unprotected when they are involved in an accident caused by uninsured (or underinsured) driver. The good news is that you can add uninsured and underinsured motorist (UM/UIM) coverage to your auto policy. With these coverages, your own insurance company will step up to pay what the at-fault driver cannot.
Below are examples of situations where UM/UIM coverage would help pay for damages, and which one would apply.

• You have severe whiplash after your car is rear-ended. The at-fault driver is a recent college graduate who simply overlooked payment on his auto renewal last month. His coverage was cancelled, he is uninsured, and has no savings to pay for your medical bills. Your uninsured motorist coverage will pay instead.
• You and your husband are taken to the emergency room after an accident caused by an impaired driver. You have a broken arm and your husband is admitted for tests and observation. Although neither of you has severe injuries, the ambulance, emergency room, tests, doctors, and overnight stay add up to over $50,000. The impaired driver has insurance with state minimum limits of $15,000 per person/$30,000 per accident for bodily injury. He is unemployed and has no financial reserves. Your underinsured motorist coverage will pay for your medical expenses that exceed the impaired driver’s liability limits.
• Your car, parked on the street, was sideswiped. No one left a note or saw it happen. Your uninsured motorist coverage will pay for the hit-and-run damages to your car. Note: Some insurance companies only provide bodily injury coverage for UM/UIM, so check your policy to confirm that property damage is included. If not, your collision coverage may apply.
• Your daughter is hit by a car while walking in a crosswalk. The driver, who has a minimum wage job, chose not to purchase auto insurance. With no prospect of recovering payment from the driver, your uninsured motorist coverage will pay your daughter’s medical bills. Uninsured and underinsured motorist coverage applies to you and your family members when you are pedestrians.

We recommend that our clients purchase UM/UIM limits equal to their liability limit. Premium for this coverage is reasonable.

More good news: you can also add excess UM/UIM coverage to your umbrella policy. Coverage applies after your auto policy UM/UIM limit is exhausted. (This scenario can occur if one or more family members are seriously injured, requiring hospitalization, surgeries, or rehabilitation.) We recommend that our clients purchase at least $1,000,000 of excess UM/UIM coverage.

No matter how law-abiding and responsible you are, you can still a suffer an uncovered auto loss through no fault of your own. Uninsured/underinsured motorist coverage can fill the gap when you are impacted by another driver’s inadequate liability insurance. With this hidden gem of coverage, it’s reassuring to know that your insurance company has your back when the other driver doesn’t.

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