The Real Value of Underinsured Motorist Insurance

April 29, 2016

These days, nobody is willing to pay more than is absolutely necessary for car insurance. If anything, there’s been a rise in cut-rate auto insurance policies that offer a bare minimum of coverage and the increase in these policies are creating a real risk for buyers as well as other drivers. For this reason, it’s a good idea to make sure your car insurance policy includes underinsured motorist insurance.

underinsured motorist insuranceWhat is Underinsured Motorist Insurance

Underinsured motorist insurance works similarly to uninsured motorist coverage. It’s there to protect you from drivers who don’t have automobile liability insurance or who have liability insurance but have very low (typically insufficient) coverage levels. But what does that mean?

How Underinsured Motorist Insurance Works

Let’s say someone runs a red light and hits your car. The total cost of your claim against their car insurance company is $250,000 to cover car repairs, hospital bills, and other related expenses. However, the person who hit you has a car insurance policy that will pay out a maximum of $100,000 per person per accident. This means that their insurance will pay that $100,000, but not the remaining $150,000. So what happens next?

Am I Covered?

If you have an underinsured motorist insurance clause in your car insurance policy, then your car insurance company will pay out (typically with the same coverage levels as your liability insurance, but this can vary so consult your car insurance policy or discuss this with your local agent). Let’s say you have coverage limits of $100k/$300k for bodily injury and liability. In that case, as we previously mentioned, your underinsured motorist insurance typically pays out with matching coverage levels. Now, you still have that $150,000 worth of medical costs that needs to be paid. Your underinsured motorist insurance clause of your car insurance policy will pay an additional $100,000 to you for those expenses as per your liability coverage limits. That is how your underinsured motorist insurance works.

Wait, that leaves you with a remainder of $50,000 worth of bills. What are your options to get those bills paid?

What to Do if Your Insurance Doesn’t Cover All Costs

In some cases your insurance, even combined with the insurance of an underinsured driver, may not be enough to pay all of your bills. It’s rare, but it can happen if you drive an expensive vehicle or if you have unusually high hospital bills. At this point, your primary option is litigation against the liable (or responsible) driver, suing them for the remaining cost of your expenses. In a situation where you are the at-fault driver, paying out of pocket is likely your only option. We highly recommend speaking to an attorney specializing in auto insurance law in either case to discuss all options available to you and it’s especially recommended to hire an attorney any time you are involved in a motor vehicle accident that results in either you or another party being injured.

You can learn more about different types of car insurance coverage and how they work by visiting our car insurance resource page.


Learn More About Auto Insurance

When it comes to auto insurance, there are a lot of variables, a lot of unfamiliar terms, and a whole lot of peculiarities – particularly when you consider that each state has its own insurance market. Our Auto Insurance Explainers can help sort it out for you, and make more educated decisions about your car insurance.

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