What is Underinsured Motorist Coverage

Underinsured motorist coverage is an auto insurance policy provision which extends coverage to include property and bodily damage caused by a motorist who has insufficient auto insurance of their own. Underinsured motorist coverage is designed to provide the injured party with compensation above the limit of the at-fault party's policy. Underinsured coverage is not the same as uninsured coverage, which includes cases where the at-fault driver had no insurance at all.

BREAKING DOWN Underinsured Motorist Coverage

​​​​​​​Underinsured motorist coverage usually adds only nominal expense to an auto insurance policy cost, but provides beneficial coverage. This coverage will become useful during an accident where the driver who was found to be at-fault does not have enough insurance to cover the cost of damages from the crash. 

It is the automobile, and not the driver, who is insured, and many people may purchase only the state-required minimum amount of insurance coverage for their vehicle. State laws generally mandate that motorists carry some level of automobile insurance coverage, and these requirements vary from state to state. New Hampshire is the only U.S. state that does not require a minimum amount of auto insurance coverage. Also, some states will require underinsured and uninsured coverage on a policy. 

According to the Insurance Research Council, during 2015. One in every eight U. S. drivers on the road did not have insurance. Numbers for underinsured drivers are more complicated to find but can be estimated to be near the number of uninsured drivers. The study found that Florida had the highest number of uninsured drivers at 26.7%, followed by Mississippi, New Mexico, Michigan, and Tennessee. The state with the lowest number of uninsured motorists is Maine having 4.5-percent.

Insurance companies will employ underwriters who will use risk analysis to determine the amount of premium due on a policy. These premiums also vary depending on the age, gender, years of driving experience, number of accidents or moving violation ticket history, and other factors. The term of insurance is usually for six or 12 months and is renewable.

Different types of underinsured motorist coverage are available from most insurance providers. Some coverage will include bodily injury and others will have property damage, while still others will cover both costs. 

Filing an Underinsured Motorist Coverage Claim

When a person has an accident which is not their fault, and the other motorist does not have enough insurance to cover the damages underinsured coverage kicks in. Once you file a claim with your provider, they will contact the other driver's insurance for payment. If the other driver did not carry enough insurance to cover your expenses adequately, the underinsured coverage would satisfy, up to the limit of your policy.

For example, assume you have medical and automobile damages totaling $200,000. The other driver has insurance to cover only $100,000. You can claim the balance against your insurance provider, up to the limit of your policy's coverage. You can not request more than the actual costs you had as a direct result of the accident. 

Some insurance providers will have a limit on how long you can wait before you file your underinsured claim. These limits will vary by company. As the insurance company settles your claim, they will want copies and billings from all medical care received and any automobile repair that resulted from the event. If the insurance provider decides the costs submitted with the claim was unnecessary or not related to the accident, they will deny those amounts. If the policyholder disagrees with the decision of the insurance provider, the case will usually go to binding arbitration.

General Auto Insurance Coverage

An auto insurance policy covers the policyholder and other family named members, whether driving the insured car or someone else’s car with their permission. The insurance also provides coverage to someone who is not named but is operating the vehicle with the policyholder’s consent.

Personal auto insurance is limited to personal driving and does not cover using the car for commercial purposes, such as making deliveries. It also does not include driving the insured vehicle during ride-sharing services such as Uber or Lyft. Some auto insurers offer supplemental insurance products at an additional cost which extend coverage for vehicle owners that provide ride-sharing services.

Most states require car owners to carry bodily injury and property damage liability, medical payments or personal injury protection (PIP), and uninsured motorist coverage. Bodily injury liability covers costs associated with injuries or death that the policyholder or another driver causes while driving the insured car. Property damage liability reimburses others for damage caused by the insured’s car to another vehicle or other property. PIP reimburses medical expenses for injuries to the insured or their passengers and will cover lost wages and related expenses. Uninsured motorist coverage reimburses the policyholder when an accident is from a driver who does not have auto insurance.