Protecting Yourself from Uninsured Motorists

Despite compulsory auto insurance laws in almost every state, about one out of eight drivers gets behind the wheel without liability coverage. In some states, more than 20% of drivers on the road may be uninsured.1

Some drivers forego insurance because they can’t afford it, while others don’t want to pay high premiums resulting from poor driving records. Even drivers who carry insurance might choose to limit their coverage to what is required by their state, but the amount may not be sufficient to cover a serious injury or extensive property damage. Regardless of their reason for not having appropriate coverage, uninsured and underinsured motorists are not only a potential financial liability to themselves, but also to insured drivers.

Fortunately, insurance coverage is available to help protect you financially if you are involved in an accident with an uninsured or underinsured driver. Though this coverage is optional in most states, it could make a big difference to you and your family.

Happy family driving in their car

Types of Coverage

Available options vary by state, but there are generally four types of coverage. Keep in mind that these coverages only apply when the uninsured or underinsured motorist is at fault, and any compensation is only up to the limits defined in your policy.

Uninsured motorist (UM) coverage [also called uninsured motorist bodily injury (UMBI) coverage] will compensate you, a passenger, or a designated driver in your vehicle (or a covered individual as a pedestrian) for bodily injuries caused by an uninsured motorist or a hit-and-run driver. This type of coverage will pay for medical expenses, lost wages, and pain and suffering.

Your health insurance would pay for medical expenses for yourself or others covered under your policy, but deductibles and other out-of-pocket expenses can be high and health insurance would not compensate you for lost wages or pain and suffering. Of course, passengers not covered under your medical insurance would have to use their own health insurance.

Uninsured motorist property damage (UMPD) coverage will compensate you for damage to your car and may also pay for damage to other personal property. UMPD is not available in all states and typically does not cover damage caused by a hit-and-run driver. If your state allows you to purchase UMPD and collision coverage, UMPD usually only pays the collision deductible. In some states, the collision deductible may be waived when damage is caused by an uninsured driver.

Underinsured motorist (UIM) coverage [also called uninsured motorist bodily injury (UMBI) coverage] helps pay the difference when costs due to bodily injury exceed the liability policy limits of the at-fault driver. Generally, the amount received from the at-fault driver reduces the maximum payout under the UIM coverage.

For example, let’s say you are legally entitled to a $150,000 settlement for medical expenses, lost wages, and pain and suffering, but the at-fault driver has only $50,000 of liability coverage. If you have a $100,000 per person bodily injury limit on your UIM coverage, you might think that your $150,000 expenses would be fully covered. In fact, you would typically receive only $50,000 from your UIM policy ($100,000 limit - $50,000 payout from the other driver). Some states offer the option for UIM coverage that is not reduced by the amount received from the at-fault driver.

Underinsured motorist property damage (UIMPD) coverage pays for damage to your car or other property that exceeds the liability limits of the at-fault driver. For example, if your car is “totaled” and valued at $20,000, and the at-fault driver only carries $10,000 liability insurance for property damage, the UIMPD coverage would pay the additional $10,000 (assuming you have at least a $20,000 limit for property damage). As with UMPD, this type of damage might be covered by collision insurance and UIMPD may only pay the collision deductible.

Depending on the state, UM and IM coverage may be bundled together or sold separately. The cost of these coverages is usually relatively inexpensive considering the potential benefits.2

No-Fault Insurance

Some states have no-fault auto insurance laws that allow policyholders to collect benefits (up to policy limits) from their own insurance company regardless of who caused an accident or whether the other party has insurance. This type of benefit may also be called personal injury protection (PIP). Even in no-fault states, UM/UIM coverage may provide an extra level of financial protection at a reasonable cost.

In Case of an Accident

If you are involved in a collision, whether in your vehicle or as a pedestrian, obtain the other party’s license plate number, driver’s license number, and insurance and contact information, and make sure to file a police report. (In an encounter with a hit-and-run driver, obtain any information you can, even a partial plate number.) If possible, use your mobile phone to take photos of the damage and the area where the accident occurred. Your insurer will investigate the claim and try to verify the cause of the accident and who was at fault.

Without UM/UIM coverage, the only way you can attempt to recover your uninsured loss is to file a lawsuit against the driver who caused the accident. Legal proceedings could prove costly, and there is no guarantee that you will receive the damages you seek. Even if you were to win a judgment, it may not be possible to collect from an individual who did not have the funds to purchase adequate insurance coverage in the first place.

UM/UIM coverage options vary widely by state. Your insurance professional can help you determine the available options and the appropriate coverage for your situation.