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Uninsured vs. Underinsured Motorist Coverage, Explained

While most drivers have car insurance, there are some who don’t. Those drivers are classified as uninsured. Then there are drivers who do have insurance, but just not enough of it. If you get into an accident with them, their insurance may only cover part of the cost. The rest you’d be paying out of pocket. Those drivers are classified as the underinsured. 

Luckily there’s insurance coverage options for you as a driver to be protected in those situations. Coincidentally those options are called uninsured motorist coverage and underinsured motorist coverage.

Why Do You Need Uninsured and/or Underinsured Motorist Coverage?

Uninsured motorist coverage would protect you when you got in an accident with an at-fault driver and that driver didn’t have any liability insurance. Underinsured motorist coverage would protect you if you got into an accident, and the at-fault driver’s insurance limits are too low to cover all of the medical and car expenses.

But a common question is, which is the better option? Or, do I really need either of them?

The answers to those questions depend on several factors. Let’s start with uninsured motorist coverage.

Uninsured Motorist Coverage

Uninsured motorist coverage or UM is a good idea to invest in when you live in a state with a high rate of uninsured drivers. If it’s mandatory in your state to have car insurance when operating a vehicle, then this option might not be the one for you. On the contrary, if your state doesn’t require car insurance, this might be an option to look into.

There’s also some slight variations of uninsured motorist coverage available. One of them is called uninsured property damage coverage or UMPD. This insurance would pay for any damage caused to your car or other property in the event of an accident with an uninsured at-fault driver. Some states require only uninsured motorist coverage, with uninsured property damage coverage being optional. Other states require both or neither. It’s best to look up your own state’s regulations.

Another variation is uninsured motorist bodily injury coverage or UMBI. This insurance would pay for any bodily injuries sustained in an accident with an uninsured driver. Again, this coverage is optional in most states. Check your own state to be sure.

Bottom line: Purchase uninsured motorist coverage if your state doesn’t require drivers to have car insurance. You don’t need this insurance coverage unless required by your state. However, it’s possible to get into an accident with some who’s uninsured. You must weigh the risks based on your location.

Underinsured motorist coverage

Underinsured motorist coverage is a good idea to invest in if you own a valuable vehicle or are accident prone.

  • Owning an expensive vehicle means more expensive repairs. To combat that and ensure your vehicle will be covered, it’s a good idea to invest in this insurance.
  • Being accident prone increases your risk of encountering the underinsured. The more accidents you get in, the greater the chance you will encounter someone with a low-limit insurance policy. Often younger drivers or those who drive vehicles worth $2,500 or less are underinsured. They are trying to pay the lowest rates either because their vehicle isn’t worth much or they are trying to cut corners on bills. A full insurance policy can be expensive for a beginner driver. 

Bottom line: Know the value of your vehicle and the limits on your own policy. If you already possess a thorough insurance policy, both of these options may be redundant. 

Bonus tip

Some insurance companies allow you to stack coverage. For example, you may have three vehicles with $10,000 worth of coverage. If one of those vehicles is involved in an accident, instead of having only its allotted $10,000, the three policies would stack. That allows you to be better prepared in the event of an accident with an uninsured or underinsured driver.

MORE: Who Has the Cheapest Car Insurance?

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