Uninsured/Underinsured Motorist Coverage: What is It? Why Should You Have It? How Much Should You Have?

Uninsured/Underinsured Motorist coverage is an optional coverage one can, and should, carry on their auto insurance policy. Because it’s not mandatory, it’s something that’s often disregarded while shopping for insurance. If you’re looking to save money on your auto insurance by not purchasing uninsured/underinsured motorist coverage you’re exposing yourself and your passengers to serious risk that could end up costing everyone in your car a lot of money.

Uninsured/Underinsured motorist coverage provides coverage to you and your passengers, to the limits of the coverage, for bodily injury sustained as the result of someone else’s fault and the at-fault vehicle, or driver, doesn’t have insurance or enough insurance. In other words, without this coverage, if you’re hit by someone with no insurance or inadequate limits, whoever’s hurt in your car (including you) will have to use their own medical insurance and, if they don’t have any, they’ll have to pay out of pocket and this could be devastating financially. Generally, your uninsured/underinsured motorist coverage should be equal to the amount of liability coverage you’re carrying; check with your insurance agent regarding rules in your state. In addition to medical expenses, your car may be damaged or destroyed and you’ll have to pay for this too unless you carry Uninsured Motorist Property Damage coverage. Many insurance companies offer only a limited amount of coverage for Uninsured Motorist Property Damage; a typical maximum coverage these days is $3500. While $3500 may not be quite enough to replace your Lamborghini Murcielago if you’re hit by an uninsured / underinsured motorist, and you don’t have this coverage, you’ll get nothing to fix your car. Check with your agent to find out what your insurance company’s limit is.

Recent statistics seem to suggest that driving with uninsured/underinsured motorist coverage is more important now than ever. Today, across the United States, if someone’s injured in an auto accident, the possibility that the at-fault driver is uninsured is 1 in 7. In June 2006, the Insurance Research Council (IRC) released the findings to a study where they concluded that more than 14% of drivers nationwide are uninsured. Also according to the study, the estimated percentage of uninsured motorists increased nationally from 12.7% in 1999 to 14.6% in 2004. While this is the national average, the percentage of uninsured motorists varies significantly from state to state. According to the IRC, in 2004, the five states with the highest estimated uninsured driver percentages were Mississippi (26%), Alabama (25%), California (25%), New Mexico (24%) and Arizona (22%). The five states with the lowest uninsured driver estimates were Maine (4%), Vermont (6%), Massachusetts (6%), New York (7%) and Nebraska (8%).

A disturbing trend I’ve noticed recently, as a result of the economic downturn, is that people are reducing their auto coverage’s to try to save money. More people are looking to cut back wherever they can to help with their finances. Going with your state’s minimum insurance coverage requirement can provide short-term savings but this strategy can backfire if there’s an accident and you have inferior coverage’s. While it makes sense to scrutinize our expenses and cut back on some things, like that third café latte of the day, skimping on insurance coverage’s can be problematic regardless of whether you’re at-fault or not. Sit down with your insurance agent and review how much coverage you need and go with the best coverage you can comfortably afford. This could help prevent big money problems for you, your family and your passengers down the road.