Underinsured Auto Insurance: Protecting Yourself on the Road

As a driver, you always want to be confident on the road. However, no matter how skilled and careful you are, accidents can happen. In such situations, you would want to have enough coverage to deal with the damages and injuries caused by the accident. Unfortunately, not all drivers carry adequate insurance coverage, leaving you and your passengers vulnerable to financial loss. This is where underinsured auto insurance comes in. In this guide, we will talk about what underinsured auto insurance is, how it works, and why it is important to have it.

What is Underinsured Auto Insurance?

Underinsured auto insurance is an optional coverage that you can add to your auto insurance policy. It provides an additional layer of protection in case you are in an accident with a driver who does not have enough insurance coverage to pay for the damages and injuries they caused. Underinsured auto insurance kicks in when the at-fault driver’s insurance policy limits are not sufficient to cover your losses.

How Does Underinsured Auto Insurance Work?

Underinsured auto insurance works by covering the shortfall between the at-fault driver’s insurance policy limits and the actual cost of damages and injuries. For example, if you have $50,000 in underinsured auto insurance coverage, and the at-fault driver’s insurance policy limits are $25,000, you can use your underinsured auto insurance to cover the remaining $25,000.

Underinsured auto insurance may cover various types of damages, such as:

• Medical expenses
• Lost wages
• Pain and suffering
• Property damage

The specifics of your coverage depend on your insurance policy. Be sure to read your policy carefully to understand what is covered and what is not.

Why Do You Need Underinsured Auto Insurance?

While auto insurance is mandatory in most states, many drivers only carry the minimum required coverage. This means that if you are in an accident with one of these drivers, their insurance policy may not be sufficient to cover your losses. In such cases, underinsured auto insurance can help bridge the gap and provide you with the financial protection you need.

Keep in mind that even if the at-fault driver has insurance, their policy limits may not be enough to cover your losses. For example, if you are in a severe accident that results in extensive medical bills and property damage, the at-fault driver’s policy limits may quickly be exhausted. Underinsured auto insurance can help cover the remaining costs, so you don’t have to pay out of your pocket.

Types of Underinsured Auto Insurance Coverage

Underinsured auto insurance coverage may come in various forms, depending on the insurance company and the state where you live. Some common types of underinsured auto insurance include:

• Added-on coverage: This is the most common type of underinsured auto insurance and is added to your existing auto insurance policy as an endorsement.
• Umbrella policy: If you have significant assets that you want to protect, you may want to consider an umbrella policy. Umbrella policies provide additional liability coverage beyond what is covered in your auto insurance policy.
• Uninsured/underinsured motorist policy: This type of policy covers both uninsured and underinsured drivers. If the at-fault driver does not have insurance or has insufficient insurance coverage, your uninsured/underinsured motorist policy can help cover the costs.

Your insurance agent can help you understand the different types of underinsured auto insurance available and recommend the best coverage for your needs.

How Much Underinsured Auto Insurance Coverage Do You Need?

The amount of underinsured auto insurance coverage you need depends on various factors, such as your assets, the value of your car, and the likelihood of being in an accident with an underinsured driver. It is generally recommended to carry the same amount of underinsured auto insurance coverage as your liability coverage. This ensures that you have adequate protection in case of an accident.

Keep in mind that while underinsured auto insurance is optional, it is a small price to pay for the peace of mind it provides. A single accident can result in thousands of dollars in damages and injuries, and having underinsured auto insurance can help protect you from financial ruin.

FAQs About Underinsured Auto Insurance

1. Is underinsured auto insurance mandatory?

No, underinsured auto insurance is optional. However, it is highly recommended to protect yourself from financial loss in case of an accident with an underinsured driver.

2. How is underinsured auto insurance different from uninsured auto insurance?

Underinsured auto insurance covers damages and injuries caused by an at-fault driver who has inadequate insurance coverage. Uninsured auto insurance, on the other hand, covers damages and injuries caused by an at-fault driver who does not have insurance at all.

3. What is the difference between underinsured auto insurance and personal injury protection (PIP) coverage?

Underinsured auto insurance covers damages and injuries caused by an at-fault driver with insufficient insurance coverage. PIP coverage, on the other hand, is a type of no-fault insurance that covers your injuries and lost wages regardless of who is at fault for the accident.

4. How much does underinsured auto insurance cost?

The cost of underinsured auto insurance depends on various factors, such as your age, driving record, and the coverage limits you choose. On average, underinsured auto insurance costs around $100 to $300 per year.

5. Can I still file a claim with my underinsured auto insurance if I am partially at fault for the accident?

Yes, you can still file a claim with your underinsured auto insurance even if you are partially at fault for the accident. However, the amount of the payout may be reduced based on your degree of fault.

6. What is the difference between underinsured and uninsured motorist coverage?

Underinsured motorist coverage provides additional protection in case you are in an accident with a driver who does not have enough insurance coverage to pay for the damages and injuries they caused. Uninsured motorist coverage, on the other hand, covers damages and injuries caused by an at-fault driver who does not have insurance at all.

7. How can I purchase underinsured auto insurance?

You can purchase underinsured auto insurance through your current auto insurance provider or by shopping around for quotes from different insurance companies. Be sure to compare coverage limits and premiums to find the best deal for your needs.

Conclusion

Underinsured auto insurance is an optional coverage that can provide additional protection in case you are in an accident with a driver who does not have enough insurance coverage. While it is not mandatory, it is highly recommended to protect yourself from financial loss. Understanding the different types of underinsured auto insurance coverage and choosing the right amount of coverage for your needs can help give you peace of mind and protect you on the road.

So don’t wait any longer, make sure you have the protection you need with underinsured auto insurance. If you have any more questions, contact your insurance agent today!