When you're buying an auto insurance policy, there are various types of coverage you can buy that will help to protect you in the event of an accident. For example, liability coverage helps pay for damages from a crash you cause. Some minimum limit of liability coverage is required in every state—but what if a driver without liability coverage hits your car, injures you, and then can't pay for your damages? That's where your uninsured or underinsured motorist coverage may come in.
As the name suggests, an uninsured driver is someone without an auto insurance policy. But, what does it mean to be underinsured? Let's say you're involved in a crash in which the other driver is at fault. You find out the other driver only has the state's minimum required limit of liability coverage, and it's not nearly enough to cover your medical bills for your injuries. In this case, the other driver would be considered underinsured—meaning that they have an auto insurance policy, but it's just not enough to cover the damage.
Uninsured and underinsured motorist coverage is designed to help you pay for bills associated with a crash that was caused by another person who either doesn't have an auto insurance policy or has a policy with liability limits that are too low to cover costs associated with a covered loss.
This is something you'll need to think about, as the limits for uninsured and underinsured motorist coverage can range from $20,000 to $1 million. Some people choose a limit equal to their bodily injury liability limit, but that's not always a requirement. For help deciding, you may want to consider a number of factors, including how much your car is worth, what kind of medical insurance you carry and whether you have access to short- and long-term disability through your employer to ensure you don't lose out on wages if you're too injured to work.
Uninsured and underinsured motorist insurance offers coverage for bodily injury and, in some instances, can offer coverage for damage to your car. It's important to note that uninsured motorist property damage coverage is not available in some states.
In addition to injuries to the driver, the bodily injury portion of uninsured and underinsured motorist coverage may also cover injuries to your passengers or family members who are driving the vehicle at the time of such a crash.
The Insurance Research Council estimated in 2011 that chances are about one in seven that a driver in the U.S. is uninsured. With that in mind, talk to an auto insurance agent today about your options to protect yourself.