The Importance of Underinsured Motorist Coverage
Although auto insurance is mandatory for all vehicle owners, the amount of liability coverage is up to the decision of the policyholder. A minimum liability coverage could turn out to be a problem if you got into a collision wherein the at-fault party carries insurance that is not enough to cover your losses. It is during such a scenario that you would thank yourself for shelling out that extra cash to pay for underinsured motorist coverage (UIM).
What is UIM?
Underinsured motorist coverage helps reduce some of the financial burdens that come when the at-fault party does not have enough coverage. UIM is offered as a.) bodily injury coverage and b.) property damage coverage.
Some states require underinsured motorist bodily injury coverage as part of your insurance policy. On the other hand, the underinsured motorist property damage coverage is not a requirement by states.
Underinsured motorist bodily injury (UIMBI) coverage will kick in when the other driver’s insurance is not enough to cover your costs for bodily injury, provided that your UIMBI limit is higher than the at-fault drivers.
For example, your total medical cost due to collision is $100,000. The at-fault driver has $50,000 of bodily injury liability while you have $25,000. Because your UIMBI is lower than the at-fault driver’s, then your insurance will not pay the remaining $50,000 on your bill.
You have the option to hire a lawyer and sue the at-fault party for the balance in a personal injury lawsuit. But if the at-fault driver doesn’t have the assets to cover the balance, although you won the case fair and square, you still won’t be able to collect.
Underinsured motorist property damage (UIMPD) coverage helps pay for damages to your vehicle if the at-fault driver has limits that don’t cover all your expenses.
But UIMPD is not restricted to vehicle damage alone. It can also cover valuable items damaged in the collision. Further, it can be used to replace the personal property if it applies to your state and circumstances.
Should you purchase Underinsured Motorist Coverage?
Underinsured motorist coverage is recommended in states with a high rate of insured drivers, or those with lower mandatory liability coverage minimum compared to other states.
See table below to see the top five states that require their motorists to carry UIM. The information is from the Insurance Information Institute.
||Estimated percent UM
||BI needed with:
||UM and/or UMI PD limits
How much does Underinsured Motorist Coverage cost?
Underinsured motorist coverage doesn’t add much to your monthly insurance premium.
The coverage limit available will be dependent on your insurer and state, ranging from a minimum of $5,000 to as much as $1 million and more. You have the option to split or combine your limits.
In a split limit plan, you have different coverage levels for UMBI and UMPD. Meanwhile, combined single limit plans mean that one coverage can already pay for both UMBI and UMPD. The combined single limit plans are only offered in a small number of states.