When you're injured in a car accident caused by another driver, you can legally sue the other driver in most states to collect the fair value of your injury.
If that driver has auto liability coverage, his policy pays you on his behalf, up to the liability policy limit he purchased.
The economic value of your injury equals your out-of-pocket expenses plus compensation for your pain and suffering.
But what if the other driver has no insurance at all? Or what if the insurance limit he has is less than the costs of your injury? You can get a legal judgment against him and try to collect from him personally.
But that can be an expensive, long, drawn-out process.
Plus, if he's not worth very much and has a limited income, you may not collect much at all.
Fortunately, your own car insurance policy can solve the problem, if you buy adequate limits of uninsured motorists and under-insured motorists coverage.
In short, uninsured and under-insured motorists coverage make up the gap between the other driver's liability coverage and the amount of liability coverage he would have needed in order to pay your claim in full - subject, of course, to the amount of uninsured or under-insured motorists coverage you buy.
How do the two coverages work? Say you're injured in a car accident caused by a driver who runs a stop sign.
The economic value of your injury is $450,000.
Now, assume that you bought $500,000 of both uninsured and under-insured motorists coverage under your own auto policy.
For an under insured motorist, first, you collect for your injury from the other driver's insurance in the amount of the other driver's liability limit (say, $100,000).
Then, you collect the balance of $350,000 from your own insurance company under your under-insured motorists coverage.
Had the other driver been without any insurance, you would have collected all $450,000 under your uninsured motorists coverage.
Buy as much protection for your own injuries (caused by another person) as you buy to cover the injuries you yourself cause to someone else.
In other words, buy the same uninsured and under-insured motorists coverage limits as you buy liability insurance limits to the extent those coverages are available in your state.
Why? Because you're worth every bit as much as a complete stranger whom you might injure.
Cover yourself accordingly.
If that driver has auto liability coverage, his policy pays you on his behalf, up to the liability policy limit he purchased.
The economic value of your injury equals your out-of-pocket expenses plus compensation for your pain and suffering.
But what if the other driver has no insurance at all? Or what if the insurance limit he has is less than the costs of your injury? You can get a legal judgment against him and try to collect from him personally.
But that can be an expensive, long, drawn-out process.
Plus, if he's not worth very much and has a limited income, you may not collect much at all.
Fortunately, your own car insurance policy can solve the problem, if you buy adequate limits of uninsured motorists and under-insured motorists coverage.
- Uninsured motorists are other drivers who are either unidentified (hit and run) or have no liability insurance at all.
- Under-insured motorists are other drivers who have some auto liability coverage but the economic value of your injury exceeds their liability limit.
In short, uninsured and under-insured motorists coverage make up the gap between the other driver's liability coverage and the amount of liability coverage he would have needed in order to pay your claim in full - subject, of course, to the amount of uninsured or under-insured motorists coverage you buy.
How do the two coverages work? Say you're injured in a car accident caused by a driver who runs a stop sign.
The economic value of your injury is $450,000.
Now, assume that you bought $500,000 of both uninsured and under-insured motorists coverage under your own auto policy.
For an under insured motorist, first, you collect for your injury from the other driver's insurance in the amount of the other driver's liability limit (say, $100,000).
Then, you collect the balance of $350,000 from your own insurance company under your under-insured motorists coverage.
Had the other driver been without any insurance, you would have collected all $450,000 under your uninsured motorists coverage.
Buy as much protection for your own injuries (caused by another person) as you buy to cover the injuries you yourself cause to someone else.
In other words, buy the same uninsured and under-insured motorists coverage limits as you buy liability insurance limits to the extent those coverages are available in your state.
Why? Because you're worth every bit as much as a complete stranger whom you might injure.
Cover yourself accordingly.