Auto Insurance: Why Pay for Uninsured Coverage?
Car Insurance to Cover Damage and Expenses from Uninsured Drivers
Mar 26, 2009
Auto insurance is legally mandated in some form or another in all 50 U.S. states. Even so, some drivers fail to carry auto insurance. If caught, these drivers may face fines, driver’s license revocation, and even possible jail time.
Now imagine what would happen if an uninsured driver causes an auto accident requiring medical assistance as well as car repair. Without auto insurance, who would pay those costs? That’s where uninsured/underinsured auto insurance comes into play.
Auto Insurance: What Is Uninsured/Underinsured Coverage?
Uninsured/underinsured auto insurance kicks in when an insured vehicle is struck by another vehicle that is either uninsured or has auto insurance but is not fully covered.
If the uninsured or underinsured vehicle is found to be at fault in the auto accident, the insured driver’s auto insurance pays for damages and/or injuries.
For example, a motorcycle that is not insured strikes a subcompact passenger car on the driver’s side, causing injury to the driver and auto damage to the front end of the car. Because the motorcycle is not insured, the cost of repair would be otherwise borne by the driver of the car.
However, if the driver of the car has elected to carry uninsured/underinsured auto insurance coverage, his or her auto insurance pays for damages and/or injuries minus deductible.
Uninsured/underinsured auto insurance coverage is optional, and can be declined by the driver. However, it is recommended that drivers carry this coverage, particularly in states with statistically higher numbers of drivers who carry little or no auto insurance.
Auto Insurance: Uninsured/Underinsured Property Damage vs. Bodily Injury
Uninsured/underinsured auto insurance is broken down into two main areas of coverage: property damage and bodily injury.
Under his or her auto insurance policy, the insured driver sets the deductible and the payment limit to property damage incurred as a result of an uninsured/underinsured driver causing damage to the car. After the insured driver pays the deductible, all costs to repair the auto are borne by the auto insurance.
Bodily injury uninsured/underinsured auto insurance pays medical expenses for the driver and/or passengers as a result of an uninsured/underinsured vehicle causing an accident. Under his or her auto insurance policy, the insured driver sets the per person/per accident payment limit (e.g., $100,000/$200,000).
Auto Insurance: Who Benefits from Uninsured/Underinsured Coverage?
According to the Insurance Research Council, approximately one in six drivers may be driving without adequate auto insurance by the year 2010.
The Insurance Research Council cites Florida, New Mexico, Alabama, Mississippi, and Oklahoma as having the highest numbers of uninsured drivers. While residents of these states would benefit the most from uninsured/underinsured auto insurance, it is recommended that everyone carry this coverage.
Auto Insurance: Will Uninsured/Underinsured Coverage Become Obsolete?
Despite best efforts on behalf of auto insurance companies and law enforcement, some drivers are still able to skirt state laws and drive without auto insurance. However, new technologies are emerging that make it easier for authorities to track and locate uninsured drivers.
Those deciding whether to elect uninsured/underinsured auto insurance may consider the risk of an auto accident with an uninsured driver minimal.
However, understanding uninsured/underinsured auto insurance, how it works, and why it is important helps to minimize the risk of potential financial hardship should an auto accident with an uninsured driver occur.
See related articles, “Understanding Auto Insurance Terminology," "Auto Insurance: Why Personal Injury Protection?" and "How to Reduce Auto Insurance Rates and Save."
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