Uninsured & Underinsured Motorist Coverage: A Guide

What is uninsured and underinsured motorist coverage?

Uninsured motorist coverage protects you and your property after an accident when the at-fault driver does not have insurance. Underinsured motorist protects you and your property when the at-fault driver has insurance, but not enough insurance to cover all the damage.

Both of these coverages are broken into bodily injury and property damage coverage options. Uninsured bodily injury (UMBI) protects you on a per person, per accident basis — as your bodily injury liability does. Your property damage coverage (UMPD) covers your vehicle from damage on a per accident basis.

In this article, we will discuss what you need to know about uninsured/underinsured motorist coverage:

• How does uninsured motorist coverage work?
• How much does uninsured motorist cost?
• Do I need underinsured motorist coverage?

How does uninsured/underinsured motorist coverage work?

State law requires drivers to carry at least liability insurance in order to cover the damage they cause to other people or their property. For example, you are rear-ended. Ideally, you would file a property damage claim with their insurance company and your car would be repaired to its pre-accident condition. 

However, if the other driver does not have insurance or their limits are not high enough to cover your vehicle’s damage, you can use your uninsured/underinsured motorist coverage. 

The specific details of this coverage depend on if you’re discussing bodily injury or property damage protection. Let’s explore.

Uninsured motorist — bodily injury

Let’s say you’re hit by a Ford F-150 while driving home from work and are injured. If the at-fault driver does not have insurance, you could be stuck with your hospital bill yourself. 

According to the ISO (International Organization of Standardization), the average bodily injury claim in 2019 was $17,024. If you don’t have health insurance or have bad health insurance, you could be looking at a serious bill. This is where uninsured motorist coverage kicks in. You would be compensated up to your coverage limits for your injuries. Your insurance company would then sue the at-fault party for damage.

This would be similar if you had an accident with a driver without sufficient liability coverage. Let’s continue the example above. If the at-fault driver only carried the liability limit and your total bodily injury damage was $17,024, the at-fault driver’s coverage would not be enough in several states.

Uninsured motorist — property damage

Uninsured motorist property damage coverage protects your vehicle if its damage by a driver without insurance or sufficient insurance. A lot of drivers forgo the use of uninsured property damage coverage because it is similar to collision coverage — they both protect the physical integrity of your vehicle. However, UMPD is a very helpful coverage for a few reasons:

• Liability limits for property damage can be very low in certain states
• Rate increases after an uninsured property damage claim are much lower than a collision claim
• It protects against hit-and-run accidents

For example, you are financing a 2020 Toyota 4Runner — MSRP starting at $36,120. On your way home from work, you’re hit by an uninsured driver which totals your vehicle. Without uninsured property damage coverage, the only way you can repay your loan and get a new vehicle would be to file a collision claim.*

Collision claims are seen as at-fault accidents and will impact your premium. On average in 2019, an at-fault accident raised rates $767 per year. Most insurance companies will charge you 3-5 years for violations and accidents. In this example, the uninsured driver’s damages would cost you $2,301-$3,835 plus your deductible.

UMPD claims are generally rated as a not-at-fault accident on your insurance premium — like a comprehensive claim. Our research shows the average UMPD claim raises rates $72 per year in 2019. Your uninsured property damage coverage does feature a deductible. However, depending on the specifics of the accident, your insurance company can reimburse you for the deductible.

*You can also take the at-fault driver to small claims court. However, this doesn’t guarantee an immediate payout.

This is similar to underinsured motorist property damage coverage. It’s totaled near it’s asking price and the at-fault driver only carries the state minimum, their liability coverage will run out before you are fully compensated. There are no states in the US in which the minimum property damage liability limit is above $30,000.

In this example, you would be left in a situation where the at-fault driver does not have enough property damage liability coverage to pay for your damages. This is where underinsured property damage liability comes in. Like an uninsured property, this coverage features a deductible. You should be able to negotiate with your insurance company to have the at-fault driver to cover the deductible.

Stacked vs. Unstacked Coverage

Stacked insurance increased your uninsured motorist coverage based on the number of cars you insure. For example, you have 3 vehicles that are insured with $10,000 worth of uninsured bodily injury coverage (UMBI). If you're struck by an uninsured driver with stacked coverage, you could apply all three vehicles' worth of $10,000 in UMBI coverage to give you $30,000 of total coverage.

You should expect an additional increase in your premium if you decide to stack your coverage. Also, this coverage is not available in every state.

Learn more about stacked car insurance.

Do you need uninsured motorist insurance coverage?

Some states require you to carry uninsured motorist coverage as part of your auto insurance policy. If uninsured and underinsured motorist coverage isn't required in your state, you might consider this policy anyway, for the following reasons:

• Your state has a large number of uninsured drivers.
• Your state's minimum liability coverage is unusually low and you have a valuable vehicle. If we think back to our example of a totaled 2020 4Runner, this coverage can protect you from being empty-handed with your coverage.
• You want protection against a hit-and-run driver, or being hit by a car as a pedestrian (both of these are also covered by uninsured/underinsured motorist coverage).
• You want to avoid a collision claim after a hit-and-run or underinsured driver

FAQs
 

Do I need uninsured motorist coverage?

About one in seven drivers is currently uninsured. There's a one-in-seven chance you could be responsible for paying for the damages to your vehicle after a collision caused by an uninsured driver, either through a collision claim or out-of-pocket. If this gives you cause for concern, consider adding uninsured coverage to your policy.

Is uninsured motorist coverage worth it?

This question is difficult to answer. You should ask yourself whether you are comfortable with risk and how confident you are in your ability to pay damages out-of-pocket if a car accident were to occur. If you drive a luxury car, you might not be as willing to risk out-of-pocket payments as someone with an older owned vehicle. Consider your financial situation before bypassing uninsured motorist coverage.

How much uninsured motorist coverage do I need?

As we stated, uninsured motorist bodily injury-related coverage will insure you against medical expenses and related costs in the case of injury, while property damage coverage will protect your motor vehicle. Depending on your preference and your state, you can elect to carry one or carry both. In terms of dollar value limitations, it is recommended to have your liability limits and your uninsured motorist limits match. Most experts recommend keeping liability limits on your insurance policy at 100/300.

 
How much does uninsured motorist insurance coverage cost?

The cost of your coverage depends on many factors — your driving history, your state, your vehicle, etc. However, our data gives us the following estimates based on a 30yo male driving a 2016 Honda Civic with no accidents or violations:

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Uninsured drivers by state