Uninsured or underinsured motorist coverage (referred to as UM or UIM, respectively), is a unique form of auto insurance in that it gives drivers an added opportunity to protect themselves from “out there”—specifically, all those people driving with little or no auto liability insurance.
While most states have mandatory minimum limits of liability required of all drivers, many of these requirements are less than sufficient in covering injuries sustained in an auto accident. Hence, the need for UM. Some states also require a minimum amount of UM be purchased; however, many leave that decision to the driver.
In addition to its unique nature, UM is an often misunderstood form of auto insurance. A common question folks ask is why someone should pay for UM if they are covered under some other form of medical or disability insurance? The answer involves understanding what UM will pay for that other policies will not.
UM policies agree to pay for compensatory damages. This term is not specifically defined in a UM policy because its intention is to cover a broad arrangement of expenses you personally incur at the fault of an underinsured driver. While it’s true that some expenses like medical costs may also be covered by your health insurance, others may not be. These expenses include disability income, injuries to passengers, and non-economic losses like pain and suffering.
Further, escalating health costs are leaving more folks without health insurance. In 2007, the number of Americans without any health insurance eclipsed 46 million. Many of these folks drive cars and are one auto accident with an underinsured driver away from financial ruin. For someone with no other medical insurance, UM is an essential, affordable coverage.
So how much UM insurance should you purchase? Since costs like those mentioned above that are covered by your UM can be expensive, it is always recommended that you carry the highest limits available. Lower limits could lead to insufficient dollars available to pay a claim, or worse. Some states' laws actually prevent recovery under your UM policy if the limits are equal to the state’s minimum auto liability requirement unless the driver who hits you has no insurance at all. While there are certainly those out there, most drivers have at least enough to satisfy their state requirement. Because state laws concerning UM coverage vary, it is important to call your agent when considering changes to your auto insurance.
In a perfect world there would be no need for UM coverage; however there are still quite a few people out there who still haven’t discovered the importance of buying adequate auto insurance. You never know who’s going to cause your next accident. UM can help you rest assured that even if they aren’t covered, you will be.