What is Uninsured/Underinsured Motorist Coverage?

Posted in Auto Insurance last updated on March 26, 2020
what is uninsured underinsured motorist

When shopping for car insurance, most people think that uninsured/underinsured motorist is a coverage that everyone should carry. And in most cases, they’re probably right.

 

What’s interesting, however, is when you ask the average car owner if they carry this coverage, they immediately reach for their car insurance ID card and discover it’s not listed and then immediately start to get nervous.

 

There’s really no reason to panic because most states do not require car owners to carry UM/UIM and typically the only coverages that are listed on your ID card are the mandatory coverages.

 

If you ask car owners what UM/UIM covers, maybe three will actually know. Most will say something like “it covers me if the other guy doesn’t have insurance or if it’s a hit and run.” Instead of making false assumptions about it, let’s answer the question accurately. What does uninsured/underinsured motorist cover or not cover?

 

About Uninsured/Underinsured Motorist Coverage

 

Uninsured/underinsured (UM/UIM) motorist coverage was originally designed to protect persons in a vehicle that was struck by another vehicle (at-fault) and either that driver did not have liability insurance or they did have it but the limits were not sufficient to cover the medical expenses of the injured party or parties.

After a while, the auto insurance carriers developed UM/UIM PD (property damage) to cover the car owner’s vehicle as well as the injuries to the (not-at-fault) driver and passengers. This means, in the states where allowed, you can easily protect yourself and your vehicle if you are hit by an uninsured or underinsured driver.

For this article, we will drill down into uninsured/underinsured bodily injury coverage only and we’ll post a follow-up article about uninsured/underinsured coverage property damage coverage.

 

Who is considered an Uninsured/Underinsured Driver?

uninsured motorist

Any driver in an accident, who is determined at-fault and is liable for the cost of injuries after an accident, is considered uninsured or underinsured under the following circumstances:

  • The at-fault driver has no liability insurance at the time of the accident
  • Has liability insurance that doesn’t meet the state’s minimum requirements
  • Has liability insurance but the at-fault driver’s company refuses to pay the claim
  • A driver who cannot be identified (hit and run)

 

Example of an Uninsured Motorist Claim

 

Sarah owns a 2019 Ford F150 and carries UM/UIM on her vehicle. When pulling up to a stop sign on a rainy day, Sarah is rear-ended by Jeff who was unable to stop his vehicle in time. When the police arrived and surveyed the scene, Jeff was ticketed for failure to have his vehicle under control and therefore, liable for the accident. Since Sarah’s vehicle was hit in the rear, Sarah was taken by ambulance to the hospital suffering severe pain in her neck. After the ER doctors looked at Sarah and did a few diagnostic tests, they conclude that she had severe whiplash and would need to wear a neck support collar for several weeks and take at least a week off from her accounting job. Sarah was advised by the police report that Adam was uninsured and was also ticketed for driving without car insurance. Fortunately, Sarah had elected to purchase UM/UIM coverage and since Adam had no car insurance, she was able to file a claim with her insurance company for medical expenses and lost wages after taking a week off from work.
In Sarah’s case, however, if she was not carrying UM/UIM coverage, her health insurance would likely have paid for her injury expenses but not her lost wages. If Sarah was driving for work-related reasons, her employer’s workers’ compensation coverage would have been the primary insurance coverage for the work-related car accident.

 

Example of an Underinsured Motorist Claim

 

John owns a 2018 Chevy Equinox and carries UM/UIM coverage on his vehicle. While moving through an intersection on a green light, John’s vehicle is t-boned by Adam’s vehicle and suffers serious injury as a result. The state where both vehicles are registered only 25/50 bodily injury liability limits and those are the limits Adam selected on his policy. After being air-lifted to a trauma center and having a battery of diagnostic tests completed, John was rushed into surgery because of internal injuries and several broken bones. John would also need a year’s worth of rehabilitation because of his injuries. The trauma center estimated John’s medical and rehab expenses to be over $300,000. Since Adam was carrying the state’s minimum required bodily injury liability limits of $25,000 per person and $50,000 per accident, Adam would personally be responsible for the remaining $250,000 of John’s medical expenses. Fortunately, John had elected to purchase UM/UIM coverage from his insurance company with limits of 250/500 and was able to file a claim with his insurer for the injury expenses Adam’s company would pay along with additional payment for pain and suffering.

 

It’s important to note here, if John was not carrying uninsured/underinsured motorist coverage, his health insurance would have likely picked up the balance of his injury expenses. Additionally, if John was driving for employer-related reasons, his employer’s workers’ compensation insurance would have been the primary coverage and Adam’s policy would have been secondary.

 

Is UM/UIM necessary if I have Health Insurance?

 

If you are struck by a vehicle that uninsured or underinsured, most health insurance plans would pay for your medical expenses, subject to your deductible and coinsurance. There are no deductibles or coinsurance requirements with UM/UIM and your company will pay from the first dollar subject to the limits you carry.

Additionally, your health insurance will not pay for lost wages or pain and suffering while your UM/UIM will pay.

Lastly, if you are in a not-at-fault car accident and want to hire a personal injury attorney, it can be very difficult if you are not carrying uninsured/underinsured motorist coverage because they typically get a percentage of the award they get for you.

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Doug Mitchell
Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent over 25 years in the insurance and financial planning industry and has also held licenses to sell securities, long-term care insurance, health, home and auto insurance.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table.  He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award.   He was also awarded as agent of the month for auto and home insurance.  Later in his career with New York Life he was an Executive Council Member.  Doug currently serves as President of Ogletree Financial, a life insurance marketing organization with over 1000 life insurance agents.  Today, Doug’s main focus is servicing 1000s of policyholders and growing his agency through the reach of www.insurancequotes2day.com.

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