Protecting Yourself Against the Underinsured - Uninsured Motorist Coverage Minimums

You’re driving along on a quiet road in a residential neighborhood. The speed limit is 25 mph, and you are steadfastly observing it. You are about to cross Elm Street when you notice your neighbor, Mrs. Haddaway, in her old Buick, out of the corner of your eye…

You wake up in a hospital bed.

What Happened?

Mrs. Haddaway says that she doesn’t know why she ran the stop sign. She’s desperately sorry for the damage she’s caused, and she assures you that her insurance will cover all of the damages. Her old Buick is totaled, but she sustained only minor injuries. After plowing into your passenger side door, you were pushed directly into oncoming traffic - a pickup truck going almost twice the speed limit. Your 2004 Lexus didn’t fare as well as her Buick, and more importantly, neither did your body.

Now For the Really Bad News

You remember how good the feeling was - walking into your bank with a check for the last $7,000 on your car loan. Now that Lexus was yours!

A year or two later, you decided to drop full coverage on your auto insurance and pay only for liability and comprehensive. After all, you’d never been in an accident, and you were so confident in your driving abilities that if you ever were, you were sure it would be the other driver’s fault. In that case, you reasoned, their insurance would pick up the tab.

All was working according to plan. You had remained accident-free since dropping your collision coverage a few years earlier, and you were saving a bundle by skimping on your insurance. Now that you had been in a serious accident, Mrs. Haddaway’s liability insurance would cover the damages.

But then you got the bad news: Mrs. Haddaway was living on a fixed income, and had recently cut back on her insurance to the minimum level required by your state. Her insurance would cover the damages, but only $10,000 of your hospital bills and only $5,000 of the damages to your Lexus. You weren’t sure what the hospital bills would be, but you knew that your Lexus, which had been totaled, would cost more than $5,000 to replace - it was worth nearly six times that!

The Importance of Underinsured Motorist Insurance

Underinsured motorist insurance is a special kind of add-on coverage for situations like this. In states that require low amounts of minimal coverage - California, Mississippi, New Jersey, Pennsylvania, and South Carolina, to name a few - underinsured motorist is especially important. After all, some states require that drivers take out as little as $5,000 to cover property damage for which they’re liable. If you don’t have underinsured motorist coverage, you could be responsible for everything above that amount.

Equally important is uninsured motorist coverage, for incidents in which the liable party has no insurance at all. If you’re not sure whether or not have have underinsured or uninsured motorist insurance, talk to your agent. Better yet, take the opportunity to comparison shop for insurance on the internet. Consumer advocates recommend that you review your car insurance policy at least twice a year, and get quotes from a minimum of three agents. After all, the only thing worse than overpaying for your auto insurance is being inadequately insured. Make sure you have all of the coverages that you need.