What is Underinsured Motorist Coverage?

State laws generally require all drivers to carry at least a minimal amount of liability insurance before they can operate a vehicle legally. The problem with these well-intentioned laws, however, is that not all drivers actually comply, or else they may only purchase enough insurance coverage to meet a minimal standard. Drivers who want to protect themselves financially from an encounter with an uninsured or underinsured motorist may want to consider adding underinsured motorist coverage to their existing insurance package.

Underinsured motorist coverage, often bundled together with uninsured motorist coverage (UM/UIM), is designed to cover the difference between the at-fault driver's maximum pay-out and the actual cost of medical bills incurred by the other driver. If an underinsured driver's liability insurance only pays a maximum of $20,000 US Dollars (USD) and the total damage to the other driver's car is $30,000 USD, for example, the victim's coverage should pay the $10,000 USD difference. It should be noted that, in most cases, UM/UIM coverage only covers medical expenses; uninsured motorist property damage (UMPD) coverage may be necessary to cover non-medical expenses.

Getting an insurance company to recognize the claim against an underinsured motorist may prove to be a challenge. The at-fault driver's liability or collision or medical coverage must first be considered maxed out. The driver's insurance company simply has no more money which can be applied to the damages or injuries. The victim has the burden of proof to demonstrate the additional uncovered damages or injuries are accurate and documented.

Some drivers choose not to add the additional premiums for underinsured motorist coverage to their existing car insurance policy because they believe other forms of insurance may cover the excess. For instance, personal medical insurance often covers the medical expenses incurred during an automobile accident. Having duplicate medical coverage with a rider covering uninsured motorists might be considered redundant by some.

In reality, automotive underinsured motorist coverage can provide even more financial protection for drivers and passengers involved in serious wrecks. Personal health insurance may only cover the injuries of the policy holder and certain dependents, but underinsured motorist coverage can cover all of the passengers in a vehicle, even those who are not covered by the driver's personal medical insurance.

Many insurance agencies strongly recommend that drivers who can afford the nominal addition to their monthly premiums should consider uninsured/underinsured motorist coverage, since there may be a considerable number of drivers on the road who are uninsured or underinsured. The additional expense added to the premium is nominal compared to the amount of uncovered damage an unemployed or underemployed driver can cause in a serious accident with multiple injuries and heavy property damage.