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Understanding Uninsured Motorist Coverage

Keeping a car on the road is not a cheap business for responsible drivers, and the cost of comprehensive insurance coverage is an expensive but often necessary addition. However, a collision with an unidentified hit and run driver, or one who has failed to maintain proper insurance on their vehicle, can leave the injured party out of pocket, even if they have diligently paid their premiums when due.

This may seem unfair, but if the other driver has little or no liability insurance, the only way to recoup costs is by litigation, an avenue that is pointless if the individual in question has few assets. It is also not possible if the identification of the at-fault driver or vehicle cannot be determined, such as in a hit-and-run incident. Unfortunately, the number of hit-and-run accidents is increasing, with reports estimating they have risen by around a fifth over a ten year period, with approximately 11% of all auto accidents now falling within this category.1 However, there is a way to circumvent the issues that the possibility of being hit by an uninsured or underinsured driver can bring and this is by including two extra levels of coverage.

Many insurers now offer drivers the chance to incorporate both uninsured and underinsured motorist coverage into the policy and in some states, such as Maryland, New York and Illinois, carriers are compelled to offer this as an option. Some states such as Washington, Oregon and Florida also require the driver to purchase uninsured motorist coverage. The enhanced levels of protection provided by this coverage obviously come at an increased premium cost, but this is minor compared to the potential losses of being involved in an accident and being unable to recoup losses from the driver at fault.

The latest survey data indicates that as many as one in seven drivers on average across the U.S. has no coverage, with Mississippi the worst state with 28% of motorists on the road without insurance.2 New Mexico, Tennessee, Oklahoma, Florida and Alabama all have more than 20% of uninsured drivers, while Washington is not far behind with 16% of motorists without coverage.

These statistics, combined with the rising incidence of hit-and-run violations, means that uninsured and underinsured motorist coverage is an increasingly popular inclusion on policies. But in order to be able to claim on either type of coverage, the accident must be demonstrated to have been the fault of the party without insurance. If the costs could not have otherwise been recouped from the other driver, a claim will not be considered under the uninsured or underinsured provisions either.

Uninsured motorist coverage comes into play when an accident is caused by a driver without any liability insurance whatsoever. The incident can either have been caused by the uninsured driver directly hitting the other party’s vehicle or by forcing them to change course and collide with something else, without a coming together of the two vehicles themselves.

Where the at-fault driver has no insurance at all, the carrier for the injured party will effectively step in and meet the costs, subject to policy limits and deductibles, to ensure that their policy owner does not suffer a financial loss as a result of the other motorist’s shortcomings. The insurer may still attempt to recoup some of the money from the other driver, but will inevitably be faced with the same difficulties that a private individual would.

In some states, there is a provision if the vehicle is not insured but the driver is not the owner and is insured on another car elsewhere. In these cases, the driver may find that their liability coverage on another vehicle can be used to meet the costs. Underinsured coverage works in a broadly similar way, except that the at-fault driver’s insurance must pay out the maximum amount allowable and the injured party’s policy will pay out the balance of the claim.

As a general rule, personal injuries, punitive damages and property damage can all be included in both uninsured and underinsured coverage. Not all policies automatically include property damage in these types of coverage, but drivers may find that, combined with their collision insurance, they are able to recoup their losses. Having no collision coverage in tandem with uninsured motorist insurance may mean a less than full payout.

Accidents that occur as a result of a hit-and-run incident can also be considered under the uninsured clause where neither the driver nor the vehicle were identified during the incident. If only the license plate of the vehicle at fault is obtained, the registered keeper of the auto will be assumed to have been the driver and will be treated as such unless information is provided to the contrary.

However, there are some limitations about what exactly is covered to prevent drivers who were at fault from claiming that an imaginary motorist caused the damage. A number of states operate the ‘no contact’ clause which means that if the damage occurs without there being any direct collision between the two vehicles, no claim will be considered. This exclusion has been primarily put in place to reduce the possibility of fraudulent claims caused, for example, by sleepy drivers veering off the road and then pinning the blame on a non-existent motorist.

Not all uninsured motorist coverage includes hit-and-run incidents, even where there is direct contact. Many policies require the injured party to have reported the accident to the local police within 24 hours of the incident in order for a claim to be considered.

Just as with any other kind of auto insurance claim, the amount finally paid out will come as a result of negotiation between the driver and their insurer. For claims where the insurer is bearing the brunt of the costs, the driver may find a particularly hard line is taken and the payout lowered for any minor indiscretions or fault.

But despite the limitations, insurance experts recommend including both uninsured and underinsured insurance in an auto policy, due to the level of protection which they provide to you.

  1. National Highway Traffic Safety Administration
  2. Insurance Research Council