According to the Insurance Research Council, about one in seven drivers in the U.S. is uninsured. Being involved in an accident with an uninsured motorist can mean huge financial losses if you don’t have the right insurance coverage.
In 2009, the most recent year for which statistics are available, 13.8 percent of motorists did not have auto insurance, according to the Insurance Research Council. This statistic reflects a national average; actual uninsurance rates vary greatly from state to state. In Maine and Massachusetts, fewer than five percent of drivers lack auto insurance, while in Mississippi, nearly one-third (28 percent) do.
What does it mean if you become involved in an accident with an uninsured driver? Motorists who drive without insurance typically do so because they can’t afford insurance premiums. Thus they’re equally unlikely to be able to pay for the damage they cause in a wreck — from several thousand dollars for a fender bender to tens or hundreds of thousands of dollars for totaled new cars or huge medical bills. And the bigger the damage, the more likely an offending uninsured driver is to file for bankruptcy.
Uninsured drivers also cost you money in other ways. Insurance companies factor a state’s uninsured costs into their premiums for safe, insured drivers. This means those who buy coverage end up paying more than they would based simply on the risk they themselves pose.
Why You Need Special Coverage for Uninsured Motorists
A basic auto policy is designed to cover liabilities you incur while operating a covered vehicle. The policy’s bodily injury liability coverage will pay for treating injuries you or a permitted driver cause another person while driving a covered vehicle. A basic policy will also cover your property damage liability, providing reimbursement for damage you cause to another person’s vehicle or property while driving a covered vehicle.
Your policy might also provide medical payments coverage or personal injury protection (PIP)., This coverage pays up to a specified amount towards the cost of treating injuries to the driver and passengers of the policyholder’s car. However, the basic policy does not provide any coverage for injuries you might suffer or damage to your own car caused by another driver—unless it includes uninsured motorist (UM) coverage. UM coverage will protect you from financial loss if you become involved in an accident with an uninsured motorist.
About half the states require motorists to have UM coverage: Connecticut, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, Washington, West Virginia and Wisconsin. The District of Columbia also requires this coverage. Although the state of New Hampshire does not require drivers to buy liability coverage, it requires policies issued in the state to include UM coverage.
Underinsurance Causes Problems, Too
Underinsured drivers are another problem. These drivers have only the minimum state-required limits of liability on their auto insurance, which might not provide enough coverage to adequately compensate others when they become involved in an accident.
For example, a minimum limit policy might provide only $25,000 per person in bodily injury coverage, to a maximum of $50,000 per accident. That might not be enough to cover serious injuries or lost wages. Underinsured motorist coverage will pay you for costs that exceed the amount of coverage the other driver carries.
In most states, insurers bundle uninsured and underinsured motorist coverage together, calling it UM/UIM coverage. Without UM/UIM coverage, your only recourse in an accident may be to sue an individual to cover your losses if the other driver doesn’t have insurance or enough insurance. That’s an expensive legal proposition and will likely result in the other driver claiming bankruptcy if large sums are involved.
UM/UIM coverage also protects you if a hit-and-run motorist hits your vehicle. And it will cover you if you are hit by a car as a pedestrian. Although you will pay your policy’s deductible when accessing this coverage, UM/UIM coverage costs little for the added peace of mind it provides.
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