Insurance companies often create products, services or coverage options that are in response to government actions. This is the case with uninsured motorist coverage and underinsured motorist coverage as they were created to help policy holders protect against accidents with uninsured parties. The problem is that many people are unaware of the differences between the two and how one could help when the other doesn’t. Here is a brief description of the difference between uninsured motorist and underinsured motorist coverage.
First, the AICPCU (American Institute for Chartered Property Casualty Underwriters) defines “Uninsured Motorists Coverage (UM)” as: “Coverage that provides a source of recovery for occupants of a covered auto or for qualifying pedestrians who are injured in an accident caused by an at-fault motorist who does not have the state minimum liability insurance or by a hit-and-run driver.” There are a few things about UM coverage that will be good for you to know.
This is only for medical coverage if you are injured by another party who is uninsured, not for damage to your vehicle. Uninsured motorist property damage coverage is another coverage that is not offered in many states. In the case of an unknown or uninsured driver hitting you and damaging your vehicle in a state that does not offer UMPD you would have to use your own coverage. You are, in effect, paying for liability coverage for yourself to protect you against people who don’t pay for it themselves.
Also according to the AICPCU, “Underinsured Motorists Coverage (UIM)” is defined as follows: “Coverage that applies when a negligent driver has liability insurance at the time of the accident but has limits lower than those of the injured person’s coverage.” In other words, if you are injured and your medical bills are over $30,000, but the responsible party only has liability coverage for up to $25,000 they are underinsured. In this case the responsible party’s insurance would pay up to the limit and the rest would be up to you to cover or to sue the other party for individually.
The benefit of this coverage is that you know that you will personally be covered regardless of what happens in an accident. The down side is that you are basically paying for the fact that someone else can’t pay for sufficient coverage. While the peace of mind is definitely worth it, the fact that you have to pay for injuries you incur that are caused by someone else is morally difficult to swallow.