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What Is Underinsured Motorist Coverage?

By September 18, 2012October 2nd, 2018Auto Insurance, PIP

Medical protection for you when “the other guy” runs out of coverage

Millions of auto accidents occur every year. Given the high speeds and low weight of cars on the road, many crashes result in serious injuries. While medical advancements can do amazing things to treat injuries, treatment comes at a high cost. Medical bills for even minor injuries can run thousands of dollars.

If you’re hurt in an accident, you’re going to want treatment and rehabilitation that restores “normal life” to you and your family. Underinsured motorist coverage can provide the financial help needed when the at-fault driver’s car insurance runs out.

Underinsured motorist coverage is closely related to uninsured motorist coverage. In some states, the two are combined and the policy’s definition of uninsured motorist also includes underinsured motorist coverage. However, the two terms mean different things, and it is important to understand the distinction when the two are purchased separately.

Both types of coverage apply only if you are injured in an auto accident where another driver is at fault. Whereas uninsured motorist coverage applies if the at-fault driver either does not have liability insurance coverage or cannot be found, underinsured motorist coverage applies if the at-fault driver has liability coverage but does not have sufficient limits to fully compensate you for damages. If your state combines the two coverage types, the difference in terms won’t matter. If you’re hurt in an accident and someone else is at fault, the coverage will pay if the other driver’s does not; however if your state considers underinsured motorist coverage separate from uninsured, the distinction can be critical.

How Important Is Underinsured Motorist Coverage?

How many people do you think carry sufficient liability coverage to pay medical bills for serious injury? Many states only require $25,000 in liability limits, which is amazingly little when you consider the potential for serious injuries. In reality, bills from even a short hospital stay can surpass the limits of many drivers’ liability coverage, and your underinsured motorist coverage may be needed to pay the difference. When you consider the relatively low minimum auto liability limits required by most states, it’s easy to see that your potential costs from an accident with an underinsured motorist can be very significant.

In states that require no-fault (or Personal Injury Protection) coverage, the comparatively low limits required prevent those with minor injuries from having to sue to recover their damages, and the no-fault limits are almost never adequate to pay the costs of hospital stays. Most medical insurance plans include significant deductibles and co-payments for hospital care and can leave a patient with substantial out-of-pocket costs. Underinsured motorist coverage can fill these gaps. All of this exposure is multiplied when multiple family members are being covered on a single policy.

How Much Coverage You May Need

The rule of thumb is that underinsured motorist limits, if provided separately, should be the same as the liability (and uninsured motorist) limits on the policy. The legal damages from an injury or a death in an accident can include areas like loss of income and other costs of recovery. These can exceed the direct bills from the doctor and hospital. A death claim can also include potential future earnings and loss of care and services to survivors.

Considering the potential damage from an accident with an underinsured motorist, if you don’t already have high limits on your medical coverage, you should seriously consider buying as much coverage as you can afford and is allowable by the insurance company.

Protect Yourself if Someone Else Is at Fault

The two terms ‘uninsured motorist’ and ‘underinsured motorist’ sound similar but mean entirely different things. The fact that some states combine the two and others separate them only adds to the confusion. Once the difference is clear, it is apparent that each is important to protect you from the costs associated with injury from an auto accident that is someone else’s fault.

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