Uninsured and Underinsured Motorist Coverage: Necessity and Benefits

When it comes to car insurance, one often overlooked aspect is uninsured and underinsured motorist (UIM) coverage. This important coverage can provide peace of mind and financial security in the event of a serious accident. Despite its benefits, some individuals might wonder if it's worth the additional premium. In this article, we'll explore the necessity and benefits of both UIM coverages and help you make an informed decision.

Understanding UIM Coverage

UIM coverage is an extension of liability coverage. It provides financial protection if the at-fault driver is either uninsured or underinsured. This means that even if the other driver cannot pay for your damages, you can still recover them from your insurer.

The Case for High Limits

While it is common to choose liability limits that match your own personal injury protection (PIP) limits, it's important to consider the full impact of UIM coverage. For instance, carrying a liability limit of $300,000 to protect yourself in case of an accident is crucial. However, if the at-fault driver has only a $30,000 liability limit and you require medical treatment, how will you cover the remaining costs of, say, a $45,000 hospital bill?

Retirees and Limited Drivers

Some individuals, such as retirees or those with limited driving, might question whether UIM coverage is necessary. As mentioned, if you are retired and have medical insurance, the need for UIM coverage might seem less pressing. However, it's important to remember that most states in the US require vehicle owners to carry minimum liability coverage. While the odds of using UIM coverage are limited, it provides a safety net in case the worst happens.

How UIM Coverage Works

UIM coverage works similarly to uninsured motorist (UM) coverage. When an accident occurs, your insurance company will pay for your damages as though they represent the other driver. This ensures that you are compensated for any shortfall in the other driver's liability coverage. It's a safety net that can provide significant peace of mind.

Limitations of UIM Coverage

While UIM coverage offers valuable protection, it's important to understand its limitations. In some states, the coverage is provided as part of collision or comprehensive coverage. This means that if you want UIM coverage, you must also purchase the corresponding collision or comprehensive coverage for your vehicle. This can make it more difficult for less valuable vehicles to get the necessary protection. Additionally, if the at-fault driver has no available assets or wages to recover from, you may need to go to court to recover your losses.

Conclusion

In conclusion, uninsured and underinsured motorist coverage is a vital component of your auto insurance policy. While the odds of needing this coverage might be low, its value in the event of a significant accident cannot be overstated. Whether you are a liability limit match or a retiree with limited driving, UIM coverage can provide the financial security and peace of mind you need.