The Difference Between Underinsured and Uninsured Motorist Coverage and How it Affects You

Coverage Definitions

Understanding how uninsured and underinsured motorist coverage work together to give you complete protection is essential. 

Uninsured Motorist Coverage (UMI) is provided for you, any insured household residents and your passengers in the car at the time of the accident. Coverage is provided for bodily injury or death caused by an accident for which the other uninsured  party is at-fault or as a result of a hit and run driver. Your insurance policy will cover medical expenses, up to the limit on your policy. Coverage is limited to your policy terms and conditions.

Underinsured Motorist Coverage (UNDUM) pays for the difference in costs between the limits of the policy of the underinsured driver and the bodily injury limits you carry on your policy, up to the limit of liability you carry. However, if your limits are inadequate to cover all costs, you will bear the extra cost personally unless you have health insurance. 

Uninsured Property Damage Coverage (UMPD) and Underinsured Property Damage Coverage (UNDPD) will pay for the damage to your car caused by an uninsured or underinsured motorist. This coverage is not available in all states. Depending on your state insurance laws, you may will need to purchase this coverage in addition to the bodily injury coverage. Property damages can be covered under collision coverage so that coverage is not as important as the bodily injury coverage.

State Laws Vary On How Underinsured Coverage Applies

You should check your state laws or talk with your agent about how underinsured - uninsured motorist coverages apply in your state. In some states, to collect for damages, the limits you carry must exceed the limits carried on the policy of the at-fault party. As an example, in an accident involving damages of $70,000 where the at-fault party has only bodily injury protection coverage of $30,000 and where you have an underinsured limit of $30,000, you can only collect the $30,000 from the other party. You would be barred from using your own underinsured motorists coverage because the limits are the same. To use your underinsured motorists coverage to collect damages, your policy limits must exceed the limits of the at-fault party.  

Stacking Policy Limits

Depending on state insurance laws and the conditions within the insurance policy you purchased from your insurance company, an injured insured may be able to stack policy limits. Check with your independent insurance agent or directly with your insurance company.

The Importance Of Uninsured - Underinsured Benefits

Estimates put the percentage of uninsured drivers throughout the United States at about 15% to 18%. With the United States economy in trouble along with the large amount of job loss over the past two years, that figure most likely is higher now. It is estimated that 20% of all accidents in the United States are caused by uninsured motorists. As you drive, take a look around you. Can you spot a potential uninsured driver? Probably not. Protect yourself with the proper coverages and limits. Discuss these important coverages with your agent.