The Uninsured vs. Underinsured motorist coverage debate is a never-ending one. Not many people understand their difference.
While Uninsured and Underinsured car insurance coverage terms are often confusing, they are simple to decipher.
Their common ground? Uninsured and Underinsured coverages are both important, not just in the legal aspect of car insurance but as part of your everyday life.
So, in this post, you’ll learn about Uninsured vs. Underinsured coverages and their important aspects.
Uninsured vs. Underinsured: What’s the Difference?
Basic car insurance is a requirement of the law. In many jurisdictions, the basic car insurance requirement is liability insurance.
However, some states may require additional insurance coverages to protect you, your patients, or your car in the event of an accident.
This is where uninsured motorist coverage (UM) and underinsured motorist coverage (UIM) come in.
Uninsured motorist coverage protects you if you’ve been involved in an accident with a driver (at-fault) who doesn’t have liability insurance.
On the other hand, underinsured motorist coverage protects you when you’re in an accident with a driver (at-fault) whose liability limits are too low to cover all the claim expenses.
Uninsured and underinsured motorist coverages protect you financially from irresponsible drivers.
What Does Uninsured Motorist Coverage Mean?
What happens if you’re involved in an accident? Usually, the at-fault driver’s insurance company pays you the claim. And if you’re in a no-fault state, you can use your no-fault insurance from your company.
What if the driver who’s hit you doesn’t have car insurance? Or what if the driver’s insurance provider cannot/will not pay out the claim?
You will rule the driver uninsured. This is where your uninsured motorist coverage comes in.
Uninsured motorist (UM) coverage protects you if you’re involved in an accident with an at-fault driver who doesn’t have liability insurance.
It steps in to give you financial protection when the other driver cannot pay out the claim either because:
- They don’t have liability insurance.
- Their insurance company cannot or will not pay out the claim. For example, if they’ve already depleted their claim limits.
What Does Uninsured Coverage Pay For?
Having uninsured motorist coverage helps you avoid paying for the recovery expenses (medical and damage) of an accident you didn’t cause. It also gives you, the uninsured members of your household and passengers financial protection.
In addition, uninsured coverage also protects you from injuries sustained from a hit-and-run accident.
The claims that uninsured motorist coverage can payout include:
- Medical expenses of the injuries that resulted because of the accident
- Costs of repair or replacement of property damage such as repair to your car
- Loss of income
- Medical costs related to treating emotional and mental issues as a result of the accident
- Funeral costs
Basically, there are two types of uninsured motorist coverage
- Uninsured motorist bodily injury coverage (UMBI)
- Uninsured motorist property damage coverage (UMPD)
The UMBI coverage includes your medical expenses, lost wages, mental health rehabilitation, and funeral costs. It may also pay the expenses for uninsured members of your household and the passengers in your car during the accident.
On the other hand, UMPD pays for repairs or replacement of your car or property after the accident with the uninsured driver.
Note: UMBI is the most common of these two, and not all states offer UMPD. Also, most insurance providers refer to UMPD simply as “uninsured motorist insurance.”
What Does Underinsured Motorist Coverage Mean?
Being “underinsured” in car insurance means that a person has insurance coverage, but the coverage’s limits cannot cover the full expenses of a claim.
This is where underinsured coverage steps in.
Underinsured motorist (UIM) coverage comes into action when you’re in an accident with an at-fault driver whose liability coverage is too low to cover the medical expenses for the injured.
Underinsured coverage gives your financial protection, including coverage for the insured members of your household and the passengers in your car.
Underinsured motorist coverage is difficult to define. Why?
The definition or requirement of underinsured coverage depends on every state’s procedures.
The deal is either the at-fault driver’s:
- Liability limits aren’t enough to cover the claim’s expenses after an accident, or,
- The liability limit is equal to or less than your underinsured motorist coverage limit.
What Does Underinsured Motorist Coverage Pay For?
Underinsured motorist coverage is similar to liability insurance but for the other driver.
You buy Underinsured Motorist Coverage because it will pay for the costs of an accident when you’re not at fault when the other driver has limited liability insurance.
This means the other driver doesn’t have enough coverage to cover the full extent of the injuries or damages caused by the accident.
Do I need Uninsured and Underinsured Motorist Coverage?
Whether or not you need to have uninsured or underinsured motorist insurance depends on a few things:
Is It Required In Your State?
Many states in the US require drivers to carry at least uninsured motorist coverage, if not both underinsured and uninsured motorist coverage.
Other Insurance Policies You Already Have?
If you already carry collision and no-fault insurance, you may not need uninsured motorist coverage.
They work almost the same. Usually, collision and no-fault coverages protect you regardless of what happens or who is at fault. But, your policy document must specify that your collision or no-fault insurance will include UM/UIM coverage.
Can You Afford It?
If this is not a state requirement and you already have collision/no-fault insurance, it can give you an unnecessary burden.
Note: It is important to purchase uninsured/underinsured motorist coverage regardless of whether or not it is a state requirement. This is called “insurance on top of insurance,” and it’s a witty thing to do.
Is Uninsured And Underinsured Motorist Coverage Worth It?
Underinsured and uninsured insurance are important coverages that everybody should have.
If you can afford full insurance coverage, uninsured and underinsured motorist coverage is generally worth it.
UM/UIM coverages often cost much less than liability, collision, and comprehensive insurance coverages.
So, we recommend having this coverage on your policy. The peace of mind that UM/UIM coverages come with is worth the dollar.
For example, if the at-fault driver causes a 3-car accident, the liability insurance might not be enough to cover the resulting injury and damage expenses.
These insurance coverages could help cover the remaining medical costs or damage repairs up to the policy limits.
Can I Stack Uninsured/Underinsured Motorist Coverage?
Yes, you can stack your uninsured or underinsured coverage if you have more than one car and insure all of them on your insurance policy.
If you want to stack your UM/UIM insurance, you can do it in two ways:
- Stack insurance coverage for two cars under one insurance policy.
- Stack insurance coverage for two cars under two insurance policies in your name.
But, stacking is only allowed by some states. Also, some insurance providers have an “anti-stacking provision” that can prevent you from stacking your UM/UIM insurance.
Also, if your provider allows stacking, you may need to pay more money on your policy because your premiums will increase.
This is especially important if you want to plan for the unexpected proactively. Seek the support of your agent to understand better what coverage is required or offered in your state. Get the coverage you most need and drive with confidence on the road.