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There are countless people who reject Uninsured and Under-Insured motorists coverage when they’re buying an auto insurance policy. Most commonly seen on insurance policies as UM/UIM, choosing auto insurance without this coverage could end up costing you much more in the future than it costs to pay in premium. If you’re working with an insurance agent or company that fails to explain this to you, you may putting yourself at a very large risk for losing not only everything you have now, but also for anything you have in the future. This coverage is there to protect you, and passing on it means you’re rejecting an important coverage that you may end up needing one day unfortunately.
Very often, people assume that UM coverage will pay for someone who is uninsured, however, this isn’t the case. In fact, this coverage is there to protect you if you’re involved in a not at fault accident and if the person who caused the accident is uninsured or doesn’t carry enough coverage to pay for your medical bills, legal costs, property loss, and more. If you fail to have this coverage and the at fault person doesn’t have insurance, you are completely helpless when it comes to recouping any damages, losses, or expenses that you could incur from the accident. The only thing you could really do is take the person to court and cross your fingers that they pay, and odds are, if they don’t have insurance, they probably don’t have the extra money laying around to pay for your injuries, property, and damages, and these costs can quickly rise.
When it comes to UM and UIM coverage, it is basically comparable to the liability limits you carry on your policy which would take care of the other party if you were at fault in an accident. These two are broken up between bodily injury coverage (UMBI) and property damage coverage (UMPD.) It’s important to check with your state to find out if both options are available to you within the state and also what the state requires for these. For example, you may end having UMBI coverage only which would pay only for your medical expenses and not any kind of property damage payment. If you only have coverage for one or the other, you’re at risk for either not having your medical expenses paid or not having your vehicle or property replaced or repaired, which means you have to take the loss upon your own shoulders.
Some states place uninsured property damage coverage under the collision coverage on your auto policy. What this means is that if you don’t carry collision coverage, than you won’t have any coverage for any damage to your property. Therefore, make sure that if you don’t carry collision coverage and live in one of these states, then you should definitely have UM/UIM coverage.
UIM coverage helps pay for any differences in expenses and losses that you incur if the person who is at fault doesn’t carry enough insurance to pay for the damages. If your loss, damages, medical bills, or other expenses cannot be covered by the other person due to their lower amount of coverage, UIM coverage will kick in once your expenses have exceeded their limits.
For example, say that you were in an accident that was someone else’s fault, and that you carry a great insurance policy that includes comprehensive, collision, and bodily injury liability that has a limit of $100,000, and property damage liability coverage up to $100,000. Additionally, you’ve matched your UM/UIM coverage limits to the same thing: $100,000 in UMPD and UMBI. Now imagine that another driver runs a red light and crashes into you, causing you to have a loss of $80,000 on your totaled vehicle, and then you accrue $500 in medical bills. Of course, the other driver is completely at fault, but the problem is that he only carries $25,000 in coverage that will pay for your medical bills and property damage. Obviously $25,000 isn’t enough to pay for your damages, so fortunately since she carried great UM/UIM coverage, her insurance would help make up the difference in what the other driver was lacking.
You are fortunate here because after reporting the accident to your company and once they find out that he doesn’t have enough coverage, your insurer will pay the difference and then go after the other driver to have him pay them back. The other driver doesn’t get out of the financial responsibility, but it saves you the time of having to take the other driver to court and you also wouldn’t be left high and dry for a certain period of time because you’ve already been compensated for the loss, allowing you to keep driving and have your bills paid.
The most important way to think about this is that if you’re going to pick high liability limits for yourself to avoid being sued if you cause an accident, why would you under insure yourself? As a general rule, set your UM/UIM limits at the same as your liability limits so that you’re covered for just as much as you’ve chosen to cover someone else if you’re ever the one at fault.