Uninsured/Underinsured Motorist Coverage

Say your car got hit by another driver and when you pursue repayment charges with the third party, you find out that the third party does not have any insurance. So will you be covered? Yes, you can be with underinsured/uninsured motorist coverage. Underinsure/uninsured motorist coverage will provide protection for your car if it needs repair from an accident that involves an uninsured/underinsured motorist.

What is uninsured/underinsured motorist coverage?

This is a coverage that will take care of the cost of treating injuries caused to you and your passengers in case you were involved with an accident with a driver who does not have insurance. In some states, UM or UIM also covers property. You must know that an uninsured/underinsured motorist is one who fulfills the following conditions:

• Does not have insurance
• Has insurance but that which does not suffice the state minimum liability requirements. You can find out about auto insurance state laws from .
• The insurance company has denied claim for insurance or the individual has not been able to pay his premiums regularly.
• Is a hit-and-run driver.

On the other hand an underinsured driver is one who has insurance that meets the state minimum requirements but have payment limits not high enough to pay for the damage incurred. Although these policies can be purchased together and are usually sold together also, these are available separately too.

Do you need UM and UIM coverage?

Uninsured/underinsured motorist coverage is not mandatory in most states. Only a handful of states require you to have it and for the rest, it is optional. So if you do purchase uninsured/underinsured motorist coverage, the payment limits must meet the state minimum requirement and cannot exceed the liability limit.

You will need this insurance in case you get in to an accident with a driver who is not insured or who has insurance, but cannot afford to pay the full cost of repairing the damage. Car repairing can be expensive and if you have to do it without proper coverage, it will be very taxing on your pocket. Considering the number of benefits it offers, you may purchase this insurance. It offers additional benefits like:

• Paying for your medical bills.
• Compensating lost wages.
• Compensating financially for pain and suffering.

In a struggling economy, you could benefit from UM and UIM coverage when the other party cannot provide full compensation for your damages. UM/UIM is also not an expensive thing to add to your policy, so you might as well consider it.

UIM pays only up to the limit of your policy minus the amount paid by the other driver at fault. This coverage is meant both for you and the passengers in your car as well as to the other members listed in your policy when using someone else's car. Many of you may think that if you have collision coverage, you don't need UM or UIM coverage. But the fact is, this is a good choice for careful drivers who have not purchased collision coverage. This as an alternative is cheaper and hence attractive too.

How are UM and UIM categorized?

Uninsured/underinsured motorist coverage is divided in to 3 broad parts:

1. Uninsured motorist property damage insurance: This is normally meant for those individuals who have not purchased collision coverage. Since this is not expensive you do not even have to pay a huge premium for this. However, this uninsured motorist property damage does not provide coverage in a hit-and-run case.
2. Underinsured motorist protection: This coverage pays for damages beyond the amount of coverage owned by the driver at-fault. You will receive an amount minus what the at-fault driver pays and not the full amount of the difference.
3. Uninsured motorist bodily injury protection: provides protection for you (insured) and any passenger in your car if they too have sustained bodily injury/injuries. As an insured, you can get coverage for bodily injury even if you get hit as a pedestrian crossing the street. Lost wages, medical bills, hospital bills are also paid. It also provides protection for your family members if they are injured while traveling in another vehicle.

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What is liability for property damage?

If your car gets involved in an accident and you are at fault, then this policy pays for any damage to the other party's property. What the other party gets compensation for is not just the labor and part expenditure for repairs, but also for any valuables if inside the car that suffered damage in the accident. This policy also compensates for any stationary object that you hit, like someone's tree or any other object that belongs to that individual.

Do you need property damage insurance?

If you are a responsible citizen and a responsible driver, you must have property damage liability insurance unless you think you can afford the entire cost out-of-pocket. Accidents happen, and it is always better that you are prepared before time. Car repairing can cost you a fortune. If someone sues you for property damage you may be needed to pay a big amount out-of-pocket. Some states require you to have state minimum property damage liability insurance.

How much property damage liability insurance must you buy?

You may buy property damage liability insurance as much as you can afford. Some states, however, have a state minimum requirement for liability for property damage which you must purchase. If you get involved in a serious accident with an expensive car, your state minimum insurance won't be able to provide enough coverage. This means that if you do not have enough coverage, you will be required to pay out-of-pocket which can cost you a fortune. If you can save with property liability insurance, you may be able to provide quite a big amount from insurance and may need to pay just a little out-of-pocket.

An expensive car may be a classic example, and besides that, if you hit someone else's property like a mailbox or even a tree or any other property, you will be responsible. Claims for property damage can cost a fortune; hence, it is advisable that you purchase coverage beyond the state minimum requirement. Property liability insurance has different limits that are set according to the various protection levels. If you increase the liability coverage limit, the policy premium gets increased as well.

How are the limits set in property damage liability?

You can have 2 main options:

1. Combined single limit policy
2. Split limit policy

Combined single limit policy provides coverage for a single amount where you can use the entire amount for bodily injury and property damage liability. Split limit policy, as the name suggests splits the amount of coverage and provides protection by dividing the amount you have for bodily injury and property damage liability. Find out more about liability limits from 

What are the restrictions in property damage liability coverage?

There are certain restrictions to the property damage. They are:

• For multiple vehicle owners: If a vehicle listed on the policy has liability limits, the rest of the vehicles must have them too.
• All vehicles must have the same selected property damage policy in case of multiple vehicle owners.
• Each state has set a state minimum liability insurance and this is required by all households to have.
• Filings: If the filing is on any commercial property, then property damage liability is required.
• Extra trailers need to give a flat fee for property damage liability.

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Collision coverage: Protect your car from damages

Collision coverage will pay for any damages that your car may suffer due to collision with some other car or object. You may or may not choose to have this coverage. Many of you who own older cars may not like to purchase this policy. However, for those of you who have a new car, you may care to purchase this policy since repairing a new car can be expensive. If you do not have such a policy in place, you will have to pay out-of-pocket.

What does collision coverage include?

You may be a very cautious driver, but the fact is that accidents happen. If your car sustains damage due to the accident, having collision coverage helps. Car repairs can be a costly affair. Collision cover helps provide financial coverage to repair your much loved car if it gets damaged in an accident.

Even if you are a very careful driver, you may get involved in an accident. If it is not your fault, you can claim compensation for collision from the party at fault. But, if the accident is because of your fault then you cannot collect for the damages incurred. This is where collision coverage comes in to play. The good part is that collision coverage will pay for the damages even when the accident has not been your fault.

Do you need collision coverage?

Take a look at the top 3 reasons why you may need this coverage:

1. An accident is your fault and there has been severe damage to your car. You cannot collect compensation from the other party. Collision coverage will pay for the damages.
2. You think an accident is the other party's fault but the other party denies the charges. If you have a collision policy in place, you can get your car repaired and then your insurance provider can subrogate the other party for your claim. However, you may or may not be reimbursed the deductible in the full amount or even part of it.
3. You are involved in an accident with a third party that does not have liability insurance.

However, if you have an old car that is in very poor condition and is not expensive too, then getting auto insurance collision coverage is not a good idea. Since such coverage is based on the actual cash value of your car, it is not a good idea to purchase it if the market value of the car is lower than what you would pay as premiums. In such a case you may like to drop collision coverage.

How much collision coverage do you need?

How much coverage you will need depends on the type of vehicle you own and few other factors. You are likely to pay a higher premium for the following few reasons:

• You own an expensive car
• Your driving history reveals you to be an accident prone driver
• Your car gets easily damaged
• Your car is hard to repair
• Your car has been stolen frequently

However, if you have a good safety record you may be lucky to get a lower premium.

How much will collision coverage pay you?

The basic factor on which depends the amount of coverage that you will receive is the worth of your car, what parts will be used to repair it and few other factors. Insurance companies pay only the Actual Cash Value (ACV) of the car. By ACV we mean the market value of the car before the accident occurred.

You will find several sources by which you can easily determine the actual cash value of your car. Your insurance company may have their own set of rules on how to determine the ACV in the area you reside in. Remember sun damages, dents and torn upholstery may lower the actual cash value of your vehicle.

How much deductible should you pay?

When you choose a deductible in collision coverage remember that this is the amount that you have to pay out-of-pocket. So, the amount that you choose must be affordable by you. Another important fact to remember is that the higher your deductible the lower your collision coverage premiums. However, this is a choice that is to be made by you depending on the financial grounds you are in.

Unlike the bodily injury liability, collision coverage is not mandatory in any state. It is entirely your choice whether you want to purchase this coverage. However, you may be obliged to purchase such coverage if you have leased the vehicle or have a lien on your car.

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Coverage for Bodily injury

If you happen to be involved in an accident where you are at fault of hurting the other person then your liability insurance is supposed to pay for the damages. Similarly if you are hurt as a result of somebody else's fault then their bodily liability insurance will come into play.

Your bodily liability injury not just protects the party injured but also his passengers (if any) and the passengers in your car (if any). Besides this it also covers the legal costs of defending yourself in court if the other party decides to sue you after an accident.

Do you need bodily injury liability insurance?

If you drive regularly or even almost regularly, you need bodily injury insurance. Most states require you to have a minimum amount of coverage and there are also some states that don't make this insurance mandatory. However, accidents usually don't come with a warning, so if you are a regular driver do get your liability insurance.

Why would you need bodily injury insurance?

The cost of treating someone in hospital can be high. Treatment can be expensive and if you have to bear it out-of-pocket all at once it can be a real burden. An accident can lead to law suits against you. You surely didn't save money for some law suit that might come up against you. Liability insurance not just pays for the liability you have towards others but also for legal suits to protect you. A third party may sue you even if you are not at fault at an accident and BI coverage protects you in any case.

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