Protecting yourself from uninsured or underinsured motorists

In 2005, more than 6 million motor vehicle crashes were reported to the police. It’s estimated that as many as one and a half times that were never reported. What protection do you have if a driver hits you, causing bodily injury, and is uninsured? Or if she just drives away? Or if his insurance does not cover your damages? 

There are two types of coverage that can compensate someone else’s lack of insurance: uninsured (UM) and underinsured (UIM) motorists protection. With uninsured motorist coverage, your insurance company compensates you for bodily injury resulting from a collision with an at-fault motorist who does not have liability coverage (subject to policy limits). This coverage kicks in when the offending motorist either does not have a bodily injury liability policy, or if the person has a policy, but the financial-responsibility limit is lower than what is required by the state where the victim’s vehicle is garaged. It also applies when the insured person is injured by a hit-and-run vehicle whose owner or operator can’t be identified.

Underinsured motorists coverage, on the other hand, supplements any gap between the liability limit of the at-fault driver and any additional bodily-injury protection you have purchased. If someone has the minimum state-required limit of liability insurance, that may represent less than the full damages awarded to the injured party. The protection offered by underinsured motorist coverage allows the injured party to collect under his or her own policy when the limits of the other person’s insurance liability are exhausted.

For example, a victim obtains a $75,000 judgment. The at-fault motorist has a liability limit of $25,000 and has no other assets to make up the difference. If the injured party has underinsured motorists coverage limits of $50,000/$100,000, his insurance would compensate him for the difference in the judgment amount.