How Uninsured and Underinsured Auto Insurance Coverage Works

When you’re in a car accident, the cost of repairs and medical treatment is covered by the insurance company of the driver at-fault for the accident. Well, at least in a perfect world. Sometimes an accident can max out the policy limits on that driver’s insurance, leaving you or your insurance company to pick up the rest of the expenses. Or worse, the other driver isn’t insured at all. Most states enforce laws requiring liability insurance, but that doesn’t mean that every driver on the road is a law-abiding citizen. Let’s talk about what happens when you’re hit by an uninsured or underinsured driver.

What is Uninsured Auto Insurance?

Uninsured auto insurance is special coverage on your auto insurance policy that kicks in when you suffer losses as the result of an accident caused by an uninsured driver. This insurance can help pay for lost wages, medical expenses, property damage to your vehicle, as well as pain and suffering. Uninsured motorists coverage protects you from having to pay these expenses out of pocket because someone else broke the law and caused an accident.

What is Underinsured Auto Insurance?

Insurance policies come in all sizes, and it’s not uncommon for drivers to carry basic coverage with low limits. Insurance companies offer a range of products that include lower-priced policies, and compromising on coverage limits can make a policy more affordable. While these policies typically cover state-mandated minimum requirements, they may be insufficient to cover all the costs associated with an accident. Underinsured auto insurance provides special coverage that kicks in when there is a balance left after the at-fault drivers’ policy has paid its policy limit.

While these types of insurance are similar in that each provides conditional coverage when certain circumstances are met, the key difference is. While these types of insurance are similar, the key difference is the circumstance that triggers each coverage.

Who Should Buy Uninsured or Underinsured Auto Insurance?

Most states across the U.S. require some combination of uninsured or underinsured motorist coverage when you buy a typical auto insurance policy. The difference is in what those policies will cover. Some states only require your uninsured/underinsured policies to cover bodily injury, while other states require coverage for both bodily injury and property damage.

For example, in South Carolina, drivers are required to purchase uninsured motorist coverage that is equal to minimum liability coverage in the state. This would provide 25/50/25 coverage for the policyholder in the event of a hit-and-run or accident caused by an uninsured driver. South Carolina drivers are not legally required to carry underinsured auto insurance, although coverage is always a good idea. Of course, the more coverage you choose, the higher your premiums will be.

At least 19 states across the U.S. require drivers to purchase additional uninsured or underinsured motorist coverage. Even if you happen to live somewhere that does not require you to carry this protection, it is always a good idea. You can’t control the actions of other drivers on the roads that you share, and there is never a guarantee that the guy in the lane next to you paid his insurance premium. Even if you have the funds to pay for repairs or hospital bills, it’s a bummer to get stuck with the bill when the accident wasn’t your fault. These risks make having uninsured and underinsured coverage a wise choice.

Understanding Minimum Auto Insurance Limits

The laws regarding the minimum insurance amount that drivers must carry will vary by state. But nearly every state in the U.S. has some sort of minimum on the books. States like Virginia and New Hampshire may allow certain drivers to waive this requirement, but each option comes with its own risks. In Virginia, drivers can pay a $500 fee to the state, which is comparable to low-end minimum coverage from most insurers. And in New Hampshire, drivers can post cash bonds in lieu of auto insurance to be effectively self-insured. These are uncommon situations but it is good to understand your state’s requirements.

Most drivers choose policies based on the coverage that is included. A typical auto insurance policy includes three types of coverage limits:

1. Bodily Injury Liability Per Person ($15,000 - $50,000 Minimum)

2. Bodily Injury Liability Per Accident ($30,000 - $100,000 Minimum)

3. Property Damage Liability Per Accident ($5,000 - $25,000 Minimum)

An auto policy that is stated as 25/50/25 means that the policy limits are $25,000 per person, $50,000 per accident, and $25,000 in property damage. If you consider that the average cost of one used car is $27,000 and the average cost of a hospital stay is well over $10,000, there isn’t much wiggle room here.

Even when an at-fault driver follows the law and purchases the minimum coverage, there is always a chance that it won’t be enough. Instead of taking on the stress and disappointment of paying your bills out of pocket and then trying to sue the other driver, a little help from the right insurance coverage can save the day.

The Takeaway on Uninsured and Underinsured Auto Insurance

The point of paying for auto insurance is to protect yourself from personal liability in the event of an accident. Even the best drivers are unable to avoid accidents in some circumstances. Icy road conditions, animals or objects in the road, and unpredictable actions from other drivers put every car on the road at risk. Auto accidents can rack up tens of thousands of dollars in expenses between medical bills and property damage for all involved. While the at-fault drivers' policy should cover a good chunk of expenses, every policy has a limit. And, if the at-fault driver doesn’t have coverage at all, you may be left in the lurch, uninsured and underinsured motorist coverage provides extra protection when you need it. The team at CIIG Insurance can help you choose a level of coverage that is appropriate for your needs. Give us a call today!