what are uninsured and underinsured motorist coverage and why do I need them?

2017 07 28 Say Blogphoto Umuimworthit

Why would anyone need coverage to protect them from an uninsured motorist when every state requires some form of insurance or proof of financial responsibility? And what the heck are we talking about with underinsured? If a driver hits you and it's their fault, you're in the clear no matter what, right? Well, maybe. But without the right coverage, it may take a lot of lawyer's fees and time to get you any sort of resolution, and even then you're not guaranteed compensation.

That being said, we've got some scenarios to show you why uninsured and underinsured motorist coverage options are absolutely worth adding to your auto policy.  

Uninsured Motorists
Even if states require drivers to carry insurance, we all know there are rule breakers out there. In fact, according to a 2014 study by the Insurance Research Council, 12.6 percent of drivers were uninsured. That's one out of every eight drivers on the road! For our Say states, the stats are even worse.

  • Colorado: 16.2 percent
  • Illinois: 13.3 percent
  • Missouri: 13.5 percent
  • Tennessee: 20.1 percent

Now say you take your chances and get hit by an uninsured motorist. If you live in a traditional at-fault state, you can take the other driver to court to prove the accident was their fault, but you still may not receive any compensation. According to Nolo Law, many drivers who are without insurance are without assets as well, meaning they probably can't afford to pay for your damages. You can win, they can claim bankruptcy and you’re left footing the bill.

Underinsured Motorists
So uninsured motorists aside, let's consider those who go the street legal route and only carry the state minimums. Typically a state is going to require what people call "liability" insurance, which includes bodily injury (BI) and property damage (PD) coverage, so we'll use those for the following example and will display them as BI per person/BI per incident/PD per incident.

In 2014, the average bodily injury claim cost $16,640, according to the research company Verisk.com. The average property damage claim was $3,290. Here are the following Say state limits:

  • Colorado: $20,000/$50,000/$15,000
  • Illinois: $25,000/$50,000/$20,000
  • Missouri: $25,000/$50,000/$10,000
  • Tennessee: $25,000/$50,000/$15,000

Technically in those four states, the average BI and PD claim would be covered.  But we need to remember that an average cost means there were claims costs that were above the average. And we don't know about you, but $16,640 is getting a little too close for comfort to some of those $20,000 limits.

We also need to consider that you may not always be driving in a state with relatively decent limits. What happens if you take a road trip to another state? Here are some others for reference:

  • Arizona: $15,000/$30,000/$10,000
  • California: $15,000/$30,000/$5,000
  • Nevada: $15,000/$30,000/$10,000
  • New Jersey: $15,000/$30,000/$5,000
  • Pennsylvania: $15,000/$30,000/$5,000

All five of those states' minimum requirements wouldn't be able to cover the average bodily injury claim, meaning that extra cost has to come out of somebody's pocket.

Cost to Add Uninsured and Underinsured Motorist Coverage to Your Policy
We started this post talking about how silly it might seem to need uninsured or underinsured coverage, but when we look at the costs of what it takes to add the coverage options to your policy, it seems sillier NOT to have the coverage.

NerdWallet compared the cost of policies with and without uninsured motorist coverage using a 2013 Toyota Camry with the following limits:

  • Bodily Injury: $100,000 per person, $300,000 per incident
  • Property Damage: $50,000 per incident
  • Collision and Comprehensive: $1,000 deductible

Adding uninsured and underinsured motorist coverage with the same limits at BI and PD ended up only increasing monthly policy costs by a few dollars. California had the steepest increase at $9 a month, while Illinois had the cheapest at $3 a month.  And even though we're the insurance people selling this stuff, we think those extra bucks are worth the peace of mind you can have knowing there are drivers out there without, or with too little, insurance.

Uninsured and Underinsured Motorist Coverage at Say
Some insurance companies list uninsured and underinsured motorist coverage as two separate options, but at Say, you'll see them combined into one coverage. We think it's important for our drivers to be protected from both the uninsured and underinsured, so rather than make it two separate decisions, we offer it as a packaged deal. 

Posted July 28, 2017 in insurance know-how.