Why Add Uninsured and Underinsured Motorist Coverage to Car Insurance?

While some states require you to take out auto insurance that covers uninsured and underinsured motorists, this isn't mandatory everywhere. If you live in a state where this kind of coverage is optional, you may think that you don't need it and prefer not to pay for it.

However, this coverage is useful. What does it do and why should you include it in your policy?

How Does Uninsured and Underinsured Coverage Work?

If you have an auto accident that wasn't your fault, then the driver who caused the accident is responsible for your costs. If your car is damaged or you were hurt, then the other driver's insurance company should deal with your repair costs and medical bills. However, this only works if the other driver has auto insurance with a sufficient amount of coverage. If the driver is uninsured, then they have no insurance company behind them who can pay your costs.

In some cases, an insured driver may have a policy; however, their insured sum might not be high enough to meet your financial needs. If they are underinsured, then they may be able to meet some of your claim costs but not all of them. Their insurance company will only pay up to its policy limits. So, uninsured motorist coverage is designed to kick in if you have an accident with a driver who has no insurance. An underinsured option protects you if a driver hasn't got enough coverage in their auto policy.

Why Take Out Uninsured and Underinsured Coverage?

Some states specify that you have to have uninsured motorist coverage; some also insist on underinsurance protection. However, if you live in a state where this isn't a requirement, then you don't have to include these options in an auto insurance policy.

This could be a false economy that will cause real financial stress if you do have an accident. If the at-fault driver has no insurance, then you may have to pay repair costs or medical bills out of your own pocket. If they haven't taken out enough insurance, then you may only get some of the payments you need. You'll have to cover the rest of your expenses.

Even if you have your own collision insurance, this may not give you all the financial protection you need. This option might cover the costs of fixing your car, but it won't cover medical bills for you or any of your passengers if they are injured. Uninsured and underinsured motorist coverage would deal with both costs.

To find out more about these options and their benefits, talk to car insurance plan providers, such as The Policy Center.