Why is it important for me to have underinsured motorist coverage?


Even if you have a personal auto policy with high liability limits, there is always the risk that you will get hit by a driver with low liability limits and sustain serious bodily injuries. In the event of this happening, the at-fault motorist's insurer will pay you compensation for your bodily injuries up to the liability limits stated in the other driver's auto insurance agreement. However, this amount may not be enough to adequately indemnify you for your pain and suffering.

Having uninsured motorist coverage will not help you in such a situation, since it protects you from being involved in an accident with uninsured motorists or hit-and-run drivers only. The best way to receive guarantee that you will be compensated for injuries you sustain as a result of a crash with an underinsured driver, is to add an underinsured motorist coverage clause to you Personal Auto policy.

Some states, such as Connecticut, Maine, Minnesota, Vermont and Virginia, insurance companies are required by state law to offer underinsured motorist coverage. In others, such as Hawaii, Iowa, Kentucky, Pennsylvania and Utah, underinsured motorist coverage is not mandatory but must be rejected in writing. In Nebraska and North Carolina underinsured motorist coverage is required, but it is only sold in conjunction with uninsured motorist coverage, with insurers charging one single premium for both, as opposed to separate premiums. In the rest of the states underinsured motorist coverage is optional.

How Underinsured Motorist Coverage Works

Underinsured motorist coverage can be purchased with split limits or a combined single limit. The coverage amount can be equal to but not in excess of your liability limits. Minimum coverage amounts apply to the states where underinsured motorist coverage is obligatory.

To illustrate how underinsured motorist coverage works, let us look at a hypothetical situation. Let's suppose your automobile gets struck by another car whose driver has split-limit liability insurance. Say, you sustain $150,000 in injuries, and the at-fault driver carries liability coverage of a maximum of $75,000 per person and $150,000 per accident. This means that you can only get $75,000 from the driver's insurer. If you carry underinsured motorist coverage, it will cover the gap. However, if you don't, you will end up inadequately compensated.

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