Uninsured Motorist Coverage and Underinsured Motorist Coverage


Uninsured Motorist coverage (UM) and Underinsured Motorist coverage (UIM) are, in our experience, the most misunderstood and under-utilized insurance policy coverages. Even insurance company representatives sometimes misunderstand the coverages, and therefore UM and UIM claims are usually handled by their more experienced adjusters.

An injured person may make a personal injury claim against their own insurance policy’s uninsured motorist (UM) coverage when the motorist who was at fault for the accident that caused their injury does not have insurance. The at-fault motorist may be uninsured for any number of reasons; they may have failed to purchase a policy, or let their policy lapse, or they may not have the permission of the vehicle owner to be driving the vehicle and therefore be denied coverage under the insurance policy.

The at-fault driver may simply be unidentifiable; such as in a case where he or she fled the scene and no identifying information on them or the vehicle was obtained. In such a case, the at-fault motorist is assumed to be uninsured and the UM personal injury claim may proceed. Uninsured motorist coverages exist to make sure that the innocent injured person is protected even if the at-fault driver fails to live up to their fiduciary responsibilities.

Uninsured Motorist coverages take the place of the at-fault driver’s liability coverages to pay the injured person. Medical bills, lost wages and other injury-related expenses are taken into account to evaluate and settle the UM claim just as if it were a regular liability claim. A settlement release will be required in exchange for payment, just as it would in the regular liability claim. The amount of money that the injured party can collect is limited by the amount of UM coverage on the policy, just as a regular liability claim payment would be limited by the amount of liability coverage on the at-fault driver’s policy.

Underinsured Motorist coverage (UIM) exists to fill in any gaps between the at-fault driver’s liability insurance limits and the value of the injury claim. The amount of UIM coverage has to be more than the amount of available liability limits in order to kick in. The best way to explain this is with an example.

Imagine that you are injured in an accident and the insurance companies have agreed that your injury claim is worth $30,000. The at-fault driver is only covered by a liability policy with $20,000 limits, so he is considered underinsured because after you collect his $20,000 policy limits, you would be left short that $10,000 difference. Therefore, you may make a claim against the UIM coverages on your own automobile insurance policy. You have UIM coverages on your own policy with limits of $50,000. The exposure to your policy is $30,000 ($50,000 - $20,000 = $30,000). The $10,000 shortage on your liability claim would be paid under your UIM coverage.

These insurance coverages are obviously valuable. They exist to make sure that the policy holder is not victimized twice; first by the accident, and second by the at-fault driver’s lack of financial responsibility. Please consider this when you are deciding how much insurance coverage to purchase; you will be protecting yourself. Lest you believe that the at-fault driver escapes responsibility altogether by failing to have adequate or even insurance, know that your insurance company will attempt to recover their payout from the at-fault driver if he or she is identifiable.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

Other articles related to this subject:

Why Bother Buying an Insurance Policy?

An Explanation of Non-Permissive Use (and why it can make an at-fault driver uninsured).

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