If you’ve ever heard the terms ‘underinsured’ or ‘uninsured,’ you may have wondered exactly what they mean. Being uninsured is pretty straightforward— it means you don’t have any insurance coverage at all. But what does it mean to be underinsured?
Being underinsured means that either you don’t have enough insurance coverage to meet the state required minimums (a crime), or your policy maximums simply don’t cover the full cost of all expenses associated with a specific claim.
For example, if your collision coverage maximum is $15,000 but a claim results in costs of $20,000, you’re considered underinsured to the tune of $5,000 for which you are financially responsible.
What Happens if You’re Uninsured and You’re in an Accident?
That leaves the most important question— what can you expect if you’re underinsured and you’re in an accident, particularly if you’re found to be the one at fault? Here’s what you can expect if you’re underinsured and are in an accident.
Financial Burden
If you don’t have proper insurance and you’re involved in an accident where you are found to be at fault, you will be 100% financially responsible for all costs associated with that accident. If you’re completely unable to pay, the other party’s uninsured motorist coverage may kick in— but that doesn’t save you entirely from financial obligation. You’ll have to cover all costs associated with damage to your own vehicle or personal injuries that you incur as a result of the accident. These costs can stretch into the thousands and transform your financial outlook for years.
Legal Exposure
Because driving while uninsured means that there’s no 3rd party insurance entity to act as your legal representative, you leave yourself completely exposed to legal action depending on the state where the accident occured. You could be sued for vehicle damage, property damage, personal injury, pain and suffering, and even psychological damage resulting from the accident. You could find yourself in a long and costly legal proceeding that can derail your life.
Loss of License
Because driving without the legally mandated minimum coverage for insurance is technically a crime, driving while uninsured could result in the suspension or loss of your license and driving privileges. This can be a huge burden, considering most people commute to work in their personal vehicle and use their license for everything from getting groceries to getting around. Don’t risk losing your driving privileges for months or even years— always make sure you’re properly insured.
What If the Other Driver is Underinsured?
We’ve addressed what can happen if you’re underinsured and involved in an accident. But what happens if the situation is the other way around, and the other driver is at fault but doesn’t have adequate insurance coverage to cover the costs of the accident?
That’s where underinsured and uninsured motorist coverage comes into play.
Underinsured and Uninsured Motorist Coverage
Underinsured motorist coverage is insurance coverage designed to protect you from financial liability in the event that you receive injuries as a result of an uninsured or underinsured driver who acts negligently and causes an accident. This can apply to someone who is driving without any insurance, someone driving with less than what their state legally requires to carry in terms of insurance minimum liability requirements, or someone whose insurance company denies their claim and who is financially unable to pay the cost themselves.
For the purposes of uninsured motorist coverage, hit and run drivers are also considered to be uninsured— at least when it comes to bodily injuries. Underinsured motorist coverage can also apply to someone who has a legally permissible amount of insurance, but which won’t properly cover the injuries you sustain. For example, a state may require a minimum of $15,000 per person for bodily injury liability coverage. If you sustain injuries totalling $30,000 in costs, underinsured motorist coverage can help make up the difference.
How does uninsured and underinsured motorist coverage work?
Underinsured motorist insurance coverage can step in in the event of property damage from a driver who is underinsured or uninsured, depending on the extent of your policy. If an uninsured driver strikes your car due to their own negligence and doesn’t have adequate insurance to pay for the costs, this coverage will pay for your collision deductible or the costs to repair your car, up to the policy limit.
It’s important to note that most underinsured motorist coverage will not cover healthcare expenses resulting from bodily injury in an accident with an uninsured or underinsured motorist.
Do I need underinsured or uninsured motorist coverage?
For the 28 US states for which uninsured motorist coverage isn’t legally required, drivers may be wondering— should I still get uninsured motorist coverage if it’s not a necessity?
Our answer? Yes. Even if your state doesn’t legally require uninsured motorist coverage or underinsured motorist coverage, it’s still a safe bet to help ensure that you won’t be left financially liable as a result of someone else’s poor decisions or irresponsible driving.
Plus, while every state (besides New Hampshire) legally requires its drivers to hold some level of auto insurance based on their specific state minimum requirements, choosing not to obey this law is unfortunately very frequent. In fact, over 13% of all Americans in 2015 were found to be driving without insurance. That’s nearly 1 in every 7 people you pass on the roads with no insurance coverage whatsoever. It adds up to nearly 30 million total uninsured drivers, and some states are even worse than others. Florida, for example, features a rate of 26.7% uninsured drivers— over a quarter of the population. Mississippi’s figures are around the same. And they’re not alone. States like New Mexico (20%), Michigan (20%), Tennessee (20%), Alabama (18%) and more are all experiencing epidemics of uninsured drivers causing problems on the road.
Conclusion
At Freedom National, our mission isn’t just to provide cheap car insurance online for people all over the country. We want to help you become a more informed, safe, and confident driver, and that begins with knowing the secrets to vehicle safety, important insurance facts, and how to navigate the rules and regulations of your state or area.
If you want to learn more, explore our knowledge base for a range of articles to help you expand your car insurance expertise.
If you’re ready to receive a free online quote from Freedom National for vehicle and get coverage in minutes, get started now. Freedom National is one of the most trusted providers of cheap car insurance online in the nation, automatically comparing rates from several major and minor insurers to find you the best possible rate and coverage. We even help people get insured who may have negative events on their driving record, from DUIs to required SR-22s.
Get covered for less today, with Freedom National.
