Are You Underinsured? Make Sure You Have Adequate Coverage

We all know that each state in the U.S. requires drivers to maintain certain auto insurance coverages. As a law-abiding driver, you need to purchase an auto insurance policy that meets the minimum requirements determined by your state. Since you're meeting the state's requirements, you think you're adequately protected—but you may want to consider that more carefully.

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Drivers who carry an auto insurance policy still run the risk of being underinsured, which means that the coverages and limits in their car insurance policy aren't high enough to cover the damages from an accident. Being underinsured could mean that in the event of an accident, you may have to pay money out of pocket if the cost of the damages exceeds your coverage limits.

The term "underinsured" often refers to the liability limits in a driver's car insurance policy. All 50 states require that drivers carry bodily injury liability coverage, which protects you in the event that someone else is injured in an accident you cause, and property damage liability coverage, which protects you in case someone else's property is damaged in an accident you cause, up to certain limits. If you cause an accident and the damages exceed your limits, however, you could be responsible for the difference.

For example, in Illinois, the minimum bodily injury liability coverage limits are $20,000 per person and $40,000 per accident, and the minimum property damage liability coverage limit is $15,000. In many cases, this might be adequate. But, consider this: You cause an accident in which two people in the other car are seriously injured, and the other car— a high-end SUV—is deemed a total loss. The medical bills for the driver amount to $30,000, and the medical bills for the passenger total $25,000—$15,000 over the per-accident limit on your bodily injury liability coverage. And, the SUV was worth $35,000—another $20,000 over your property damage liability limit.

In this case, because your limits were not high enough to cover your financial responsibility in the crash, you would potentially have to pay tens of thousands of dollars out of pocket. To avoid this type of scenario, you may want to consider raising your liability coverage limits. Raising your limits will likely make your insurance premiums, or the amount of money you pay each month, increase, but it can give you more peace of mind in case of an accident.

Other Coverages

In addition to bodily injury and property damage liability coverages, there are a variety of auto insurance coverages out there to help protect you. If you still owe money on your auto loan, or if you lease a vehicle, some of these additional coverages, such as collision and comprehensive coverage, may be required by your lender or lease holder.

Whether these additional coverages are required or not, you may want to consider purchasing them, in order to make sure you're adequately covered. Additional coverages can help you in many ways, including:

  • Collision coverage helps protect you in case your car is damaged in an accident, regardless of who's at fault.
  • Comprehensive coverage helps protects you in case your car is damaged in an accident that's not a collision, such as a fire or vandalism.
  • Uninsured/underinsured motorist protection is important in case a driver without insurance or with insufficient insurance causes an accident in which you're injured or your property is damaged. This coverage will help cover the cost of the damages.
  • Medical payments coverage helps pay for medical expenses if you, your passengers or your family members are injured in a covered accident.
  • Personal injury protection (available in some states) can help reimburse you for lost income and other expenses if you're hurt in a covered accident.
  • Other coverages can provide additional protection.

Being safe on the road isn't just about wearing a seat belt (although that's always a good idea). Get in the driver's seat of your financial protection and make sure you have adequate car insurance. Have questions? Contact an agent today.

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Published: October 2013

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2013 Allstate Insurance Company, Northbrook, IL.

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