When it comes to auto insurance, most people focus on liability coverage, collision coverage, or comprehensive coverage. However, one crucial component often overlooked is Uninsured/Underinsured Motorist (UM/UIM) insurance. This coverage provides invaluable protection when the unexpected happens. Let’s dive into what UM/UIM is, how it works, and why it’s essential for your financial security.
What is UM/UIM?
This insurance coverage protects you if you are involved in an accident with a driver who either:
Has no insurance at all (Uninsured Motorist coverage, or UM).
Has insufficient insurance to cover the damages (Underinsured Motorist coverage, or UIM).
Even though most states require drivers to carry auto insurance, a surprising number of people either drive without coverage or carry only the minimum required limits, which may not be enough to cover all the expenses resulting from a serious accident.
How does UM/UIM coverage work?
If you’re in an accident caused by an uninsured or underinsured driver, your UM/UIM coverage can step in to cover damages, including:
Medical expenses for you and your passengers.
Lost wages if you’re unable to work due to your injuries.
Pain and suffering, depending on your policy and state laws.
Property damage, if your policy includes this option.
For example, imagine you’re hit by a driver who only has $25,000 in liability coverage (this is Illinois state minimum requirement), but your medical bills and lost wages total $50,000. If you have UIM coverage, your policy can cover the remaining $25,00 (up to your policy limit).
Why is UM/UIM Insurance Important?
High rates of uninsured drivers: According to the Insurance Research Council, approximately 1 in 8 drivers in the United States are uninsured. In some states, the percentage is even higher.
Low minimum coverage requirements: Many states have low minimum liability insurance requirements that might not cover significant medical bills or property damage.
Protection for You and Your Passengers: UM/UIM coverage ensures that you and your loved ones are financially protected after an accident, even if the at-fault driver cannot pay for the damages.
Affordable coverage: Adding UM/UIM coverage to your policy is often relatively inexpensive compared to the potential financial risks of being involved in an accident with an uninsured or underinsured driver.
Is UM/UIM Coverage Required?
UM/UIM requirements vary by state. Some states mandate this coverage, while others allow it as an optional add-on. Even if it’s not required, it’s worth considering as part of your auto insurance policy.
How much coverage should you get?
The amount of UM/UIM coverage you need depends on your financial situation and risk tolerance. A good rule of thumb is to match your UM/UIM limits to your liability coverage limits. For instance, if you carry $100,000 in bodily injury liability coverage, consider purchasing $100,000 in UM/UIM coverage.
Tips for Choosing UM/UIM Insurance
Review your current policy: Check if you already have UM/UIM coverage and understand the limits.
Evaluate your risk: Consider the likelihood of encountering uninsured drivers in your area and adequacy of your health insurance or other financial safety nets.
Speak with an Insurance Agent: A knowledgeable agent can help you determine the right level of coverage for your needs and budget.
Final thoughts:
UM/UIM insurance is an essential safety net that protects you from the financial fallout of accidents involving uninsured or underinsured drivers. While no one wants to think about worst-case scenarios, having the right coverage in place can provide peace of mind and financial security when you need it most. Take the time to evaluate your policy today and ensure you’re adequately protected on the road.