How Underinsured Motorists and Uninsured Motorist’s Insurance Works

ELI5: Negligence

If you don’t have underinsured motorist and uninsured motorist coverage, it may be time to think about updating your policy.

How Insurance Works – Underinsured Motorists

Periodically, you’ll pay a set sum to an insurance company. You may pay this every month, every quarter, twice per year, or once per year. The amount you pay is called your premium. Your premium is based on many factors such as the amount of accidents you’ve had in the past, how many citations you’ve received, how much coverage you have, what kind of car you drive, and more. The policy limit identifies the amount of coverage you have. So if you have a policy that will cover up to $25,000 in property damage, that means that your insurance will pay up to $25,000 for any property that’s damaged in the event of an accident. You pay car insurance so that the insurance company covers damages related to any car accident you may be in or may cause, up to the policy limit. Generally speaking, the higher the policy limits, the more protection you have. In many cases, the difference between minimum insurance coverage and maximum insurance coverage is only a few dollars per month. This is the same with differences in coverage. Some people pay for liability/collision coverage only. This means your insurance company will only pay if you are at fault. But what if you get hit by someone with no insurance, if you only have collision coverage, your insurance company isn’t obligated to pay for your own property damage- only damage you cause to others. So it’s important to be sure you have comprehensive coverage- that protects others and protects yourself. Now, if you cause an accident, your insurance also pays for an attorney to defend the interests of your insurance company. Although they may appear to defend you as well, the interests of the insurance company and your interests may not always be the same. The insurance company makes money when they don’t have to pay out for claims. However, you are protected when the insurance company pays to resolve your claim, so think about whether your and your insurance companies interests are aligned or not. 

No-Fault State vs Fault State

In no-fault states, each party will file a claim with their own insurance company.

Drivers in “no-fault” states are required to carry personal injury protection, or PIP insurance to cover bodily injuries sustained during an accident. If the cost of your bodily injuries is over $3,000.00, you may be able to file a personal injury claim against the at-fault party in order to be fully compensated for your injuries. In some at-fault states, you can choose to add on PIP insurance, but you aren’t required to have it. In at-fault states, drivers will file a claim with the other party’s insurance. Then the insurance companies will decide which party is at fault. The at-fault party’s insurance will pay for the property damages and the costs of the injuries sustained.

Underinsured Motorists Insurance

Your insurance policy limits can be equally as important, even when you’re not at fault for the accident. Remember when we talked about policy limits? If a person is in an accident and has a policy that will pay up to $50,000 per person for bodily injury liability, their policy will likely pay for up to $50,000 worth of medical care. While that may seem like a lot, it doesn’t go as far as you may think. However, there are many cases where $50,000 doesn’t cover all of a person’s medical expenses. If the at-fault party doesn’t have enough coverage to pay for all the injured party’s injuries even after paying the full amount of their policy, the at-fault party is considered to be “underinsured” and the injured party may be able to get additional compensation from their own insurance policy’s underinsured motorists coverage. So, let’s say the injured party has $100,000 in medical bills. After filing a personal injury claim, the at-fault party’s insurance policy limit will only pay $50,000. The injured party is eligible to make a claim under their own insurance to cover the remaining $50,000 of medical bills. Although you may be able to sue the defendant personally, it can often be difficult to recover those funds. Instead, you may also be able to use your underinsured motorist coverage to make up the difference, or at least get additional compensation for your injuries. Most importantly, making a claim against a UIM policy does not adversely affect your policy limit premiums or count as a claim that can raise your rates, because the claim was only possible due to someone else being at fault.

Uninsured Motorists Insurance

Uninsured motorist insurance works a lot like underinsured motorist insurance. Uninsured motorists insurance is for situations where the at-fault party didn’t have any insurance at all. In this situation, the injured party may still be eligible for compensation if they have uninsured motorist insurance. Uninsured motorist insurance may be a good thing to have even if you live in a no-fault state. When it comes to medical expenses, personal injury protection doesn’t always go as far as most would like it to. If your medical bills have already exceeded the personal injury protection, and the at-fault driver didn’t have insurance, you may be able to get additional compensation through your uninsured motorist policy.

Should You Have UIM/UM?

Underinsured and uninsured motorist coverage is usually relatively inexpensive. Additionally, it may protect you from drivers who don’t have any insurance, and drivers that do not have enough insurance. In order to make the best assessment for your personal situation, you may need to speak with your insurance agent about what coverage is available to you. Insurance companies are supposed to be there for you if you’ve been injured. But they don’t always compensate the injured party fairly. If you have been injured, and you’re seeking fair compensation, contact Moxie Law Group today to find out how we can help you.

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