The Difference Between Uninsured and Underinsured Motorist Coverage
What is the difference between uninsured motorist coverage and underinsured motorist coverage?
- Uninsured motorist coverage (“UM”) is designed to protect drivers and passengers if the at-fault driver in an accident does not carry automobile liability insurance coverage.
- Underinsured motorist coverage (“UIM”) is designed to protect drivers and passengers if the at-fault driver has insufficient automobile liability insurance coverage to pay for your injuries.
Both coverages have the letter “U” in them. That means they cover “you” in the event of a motor vehicle crash.
How does uninsured motorist coverage work? UM coverage protects you in the event that you are one of the unlucky crash victims who was hit by somebody without insurance. It may hard to believe, but there are 28 million uninsured drivers in the U.S. That equates to 1 out of every 8 drivers on the roadway.
How does underinsured motorist coverage work? With UIM coverage, if you’re in a motor vehicle crash and you sustain $50,000 in damages due to your injuries, but the at-fault driver only has the minimum $25,000 bodily injury coverage, your UIM coverage will bridge the financial gap. In other words, your own insurance company will make up the difference.
UM and UIM Coverage in California, Arizona, and Colorado
In Arizona, Colorado and California, UM and UIM coverages are optional. You have to proactively purchase these coverages. They are not made mandatory by law.
Each state has its requirements with regard to UM and UIM. It’s important to understand your rights when purchasing automobile insurance coverage.
Arizona law states that every insurer writing a motor vehicle liability policy must offer, in writing, UM and UIM to their insureds in an amount equal to the insured’s liability coverage. If the insureds reject this coverage, insurers must prove compliance with the statute by having their insureds sign a Department of Insurance-approved form that indicates selection or rejection of such coverage.
Colorado law states it is mandatory that the insurance provider offer collision, medical-payments, and uninsured-motorist coverage. Such coverage may only be rejected by the insured in writing.
California law requires insurers to include UM and UIM in automobile policies, unless the insurer and insured execute a written waiver in a specific format that is laid out in California law. If the insured does not sign the three-page waiver, UM and UIM are made part of the insurance policy.
Please note: It is illegal for an insurance company to raise your insurance premiums if you use your own coverages when you are not at-fault for a motor vehicle crash. Check out Arizona Revised Statutes §20-263 to read the law.
Protection Provided by UM and UIM Far Exceeds the Costs
Now that you know the difference between uninsured motorist coverage and underinsured motorist coverage, should you buy these coverages?
Typically, the costs of UM and UIM coverages are not expensive — just a few percent of your overall auto premium. If your annual auto insurance premium is $600, adding UM and UIM would be an additional $30. What you pay out of pocket certainly pales in comparison to what you would pay if the at-fault driver has no insurance coverage or insufficient coverage for your injuries.
Remember, more than 75,000 people are injured each day due to vehicle accidents in the U.S. Make sure you have the proper coverages to protect yourself.