As auto insurance premiums continue to rise, some motorists find it challenging to afford the higher rates, leading them to make difficult decisions like not purchasing insurance or purchasing a policy that only has the state-mandated minimum liability limits.
A new study by the Insurance Research Council found that one in three U.S. drivers nationwide is either uninsured or underinsured in 2023, up 10% since 2017. Nearly every state in the country, except New Hampshire, requires drivers to purchase liability insurance. Despite that, more Americans than ever are choosing to go without it or get just the bare minimum coverage required.
Driving underinsured means having an insurance policy that does not provide sufficient coverage to protect against potential damages or liabilities in an accident. This can often happen if you purchase a policy with only the minimum liability limits required by your state. Some of the mandated limits are lower than the cost of an accident.
On the other hand, driving uninsured means having no insurance coverage at all.
Both scenarios can create significant problems. When drivers who are underinsured or uninsured get in an accident, several issues can arise:
- If the uninsured driver is at fault, they can be held personally responsible for covering all the damages, medical expenses and other liabilities resulting from the accident.
- If an underinsured driver with policy liability limits that are too low is at fault, they would be on the hook for the rest of the damages after the insurance company pays its share of the claim.
- If the at-fault driver lacks adequate financial resources, the other party involved in the accident may not receive the compensation they are entitled to. This can leave innocent victims without proper reimbursement for their medical bills, property damage and other losses incurred in the accident.
- Even if the other driver has uninsured motorist coverage, the insurance company will likely sue the at-fault driver to recover its losses for whatever it ends up paying out.
Uninsured motorist coverage
Thousands of people on the road who are either underinsured or uninsured pose a financial threat to other motorists and the general public.
That’s why it’s important to include uninsured/underinsured motorist coverage in your policy. This coverage provides benefits to the policyholder and other eligible occupants of their vehicle if they are injured in an accident caused by an uninsured driver.
On the other hand, underinsured motorist coverage comes into play when the at-fault driver has insurance, but the coverage limits are insufficient to fully compensate for the damages caused in the accident. In that case, the policy is triggered once claim costs exceed the underinsured driver’s policy limits.
To address these concerns and protect responsible drivers, many states require auto insurance policies to include uninsured/underinsured motorist coverage.
Even if your state doesn’t require that you carry UM/IUM coverage, you should purchase it.
Experts say that the minimum UM/IUM liability limits you should carry are $100,000 per person or $300,000 per accident.
The takeaway
With this coverage, if you are the innocent party involved in an accident with an uninsured or underinsured driver, your insurance policy will step in to cover your medical expenses, lost wages and property damage up to the limits of your coverage.
This ensures you won’t be left in a dire situation due to someone else’s lack of insurance.