Underinsured motorist coverage (UIM) is an essential component of auto insurance that provides protection for drivers when they are involved in accidents caused by other drivers whose insurance coverage is insufficient to cover the damages. This article aims to delve deeper into what UIM is, how it works, and its various aspects to help you understand why having this coverage is beneficial.
What is Underinsured Motorist Coverage?
Underinsured motorist coverage is designed to step in when the at-fault driver has insurance, but the liability limits of their policy are lower than the damages you incurred from the accident. For example, if the at-fault driver has $25,000 in liability coverage but your medical bills and vehicle repair costs amount to $50,000, UIM coverage will help cover the remaining costs, up to the limits of your own policy.
Differences Between UIM and Uninsured Motorist Coverage
While UIM coverage is often confused with uninsured motorist coverage (UM), they serve different purposes:
- UIM Coverage: Applies when the at-fault driver has insurance, but it is inadequate to cover your damages.
- UM Coverage: Applies when the at-fault driver has no insurance at all.
Understanding the distinction is crucial for ensuring that you have adequate protection in various accident scenarios.
How Underinsured Motorist Coverage Works
Imagine you are involved in an auto accident that wasn't your fault. After the accident, you ensure everyone is safe and then exchange information with the other driver. Upon contacting your insurance company, you discover that the at-fault driver has only the state-required minimum liability coverage, which is insufficient to cover the cost of repairing your vehicle or your medical expenses.
In this case, your UIM coverage kicks in to cover the additional costs, up to your policy limit. UIM typically includes two main parts:
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Bodily Injury Coverage: This covers medical bills resulting from the accident and can also compensate for lost wages if you are unable to work due to injuries sustained in the crash.
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Property Damage Coverage: This portion covers the repair or replacement costs for your vehicle affected in the accident.
Filing a Claim
It's essential to note that when filing a UIM claim, you cannot claim more than the total actual costs you incurred as a direct result of the accident, including medical bills and vehicle repairs.
Benefits of Underinsured Motorist Coverage
Having UIM can be highly beneficial for several reasons:
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Financial Security: The minimum auto insurance coverage required by the state is often inadequate to cover significant damages from serious accidents. UIM provides an extra layer of financial protection to fill this gap, ensuring that your medical expenses and vehicle repairs are taken care of.
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Peace of Mind: Knowing that you are protected in case of an accident with an underinsured driver can help alleviate anxiety and stress when driving.
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Stacking Options: In certain states and with some insurance companies, you may have the option to combine (or "stack") coverage limits across multiple vehicles on the same policy, effectively increasing your protection limits after an incident.
State Requirements for UIM Coverage
UIM coverage is not universally required; regulations vary by state. Here's a brief overview:
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Required States: States such as Connecticut, Kansas, Maine, Maryland, Minnesota, Nebraska, North Carolina, North Dakota, Oregon, South Dakota, Vermont, New Hampshire, and Virginia mandate a certain level of UIM coverage.
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Optional States: In some states, drivers can elect to purchase UIM coverage as an optional endorsement.
Special Considerations
- Illinois: UIM coverage is mandatory if you opt for a higher UM coverage limit than the minimum required.
- New Jersey: UIM is required if you choose a standard auto policy but is not mandatory under a basic policy.
What Is Covered by Underinsured Motorist Coverage?
UIM coverage typically consists of:
- UIM Bodily Injury Coverage: This addresses medical expenses and may cover lost wages.
- UIM Property Damage Coverage: This pays for vehicle repair or replacement costs.
In several states, only bodily injury coverage may be available, so it’s crucial to check what is required and available in your location.
Hit-and-Run Accidents
It’s important to clarify that UIM coverage does not apply to hit-and-run incidents, as such cases are classified under uninsured motorist scenarios. Instead, UM coverage would typically take effect. Depending on your state's laws, you might also be required to have collision coverage to fully protect yourself in a hit-and-run situation.
The Bottom Line
Underinsured motorist coverage serves as a vital safety net for drivers, ensuring that you’re financially protected if you find yourself in an accident with someone who does not have enough insurance. While UIM is mandated in some states, it remains an essential consideration for all drivers to consider when purchasing auto insurance, providing peace of mind on the road ahead. Always consult with your insurance agent to understand your policy's specifics and what is best suited for your needs.