ForTwo men, Bob and Larry, were recently in an accident. Larry hit Bob with his truck and totaled Bob’s car. It was entirely Larry’s fault, but he’s uninsured. Bob, on the other hand, has liability coverage that includes uninsured motorist coverage.
Is this enough to cover the damage to Bob’s vehicle? Will Bob be reimbursed for the value of his totaled car (in this case, about $18,000)? Will Larry cover any of the costs himself since the accident was, in fact, his fault?
This is a tricky situation with several variables, so we’re going to break it down for you. We’ll start by diving into what some of these key terms mean and what exactly they cover in an auto accident.
Liability Insurance
Liability insurance covers you in an accident that is your fault by paying for the damage to someone else’s property or injuries you caused anyone else involved in the accident. It does not, however, cover your own injuries or damage to your vehicle. Liability insurance also protects you if you’re sued for causing an accident—at least up to the amount of your policy limit.
There are two main types of liability insurance. Property damage liability helps cover repair and replacement costs of vehicles, valuables, and property that belong to others involved in the accident you caused. Bodily injury liability covers medical expenses and lost wages for others involved.
Uninsured & Underinsured Motorist Coverage
Protection Against an Uninsured Motorist
Uninsured motorist coverage offers you protection if you’re in an accident that is not your fault and the at-fault driver is uninsured. It may also cover you—depending on your policy—if you’re the victim of a hit-and-run accident. Underinsured motorist coverage protects you if the at-fault driver has less liability insurance than he or she needs to cover all costs involved.
Like liability insurance, uninsured and underinsured motorist coverages can be broken down into two main categories: bodily injury and property damage. Uninsured motorist bodily injury insurance will pay for the cost of your medical bills if you are injured, as well as reimburse you for lost wages. Uninsured motorist property damage insurance will pay for repairs to your vehicle that was damaged in an accident—up to a certain amount; some states limit this coverage to around $3500.[1] However this coverage is rare and should not be assumed.
Protection Against an Underinsured Motorist
Underinsured motorist bodily injury and property damage coverages work similarly to uninsured. The difference is that the underinsured individual will have to pay as much as their insurance policy allows, and you will be responsible for the rest. Your underinsured coverage will kick in to help make up the difference.
According to the Insurance Research Council, about 13% of motorists drive without auto insurance,[2] even though most states require that drivers at least carry liability insurance. 21 states in America also require drivers to carry uninsured motorist coverage. Uninsured motorist property damage (UMPD) coverage, however, is not available in every state.[3] Make sure you understand what’s available in your state and your minimum insurance requirements.
Collision Coverage
This insurance is similar to UMPD insurance, but there are a couple of key differences. Collision insurance covers damage to your car if you collide with another vehicle or hit a fixed object—regardless of whose fault it is. It will also cover damage done to your vehicle by an uninsured or hit-and-run driver. Collision insurance will pay for the repairs needed to fix your car up to the limits of your coverage, which is typically the actual cash value of your vehicle.[4]
It’s important to note that while a UMPD claim will not be considered your fault (and, therefore, won’t necessarily affect your insurance rates), a collision claim could be recorded as your fault and will likely cause your premium to rise.
Example Scenario
Let’s go back to our initial scenario. Remember Bob with the liability insurance was hit by Larry, and his car was totaled. Unfortunately for Bob, Larry doesn’t have the means to pay for any of the damage since he has no insurance. And Bob’s basic insurance policy won’t reimburse him for the total value of his $18,000 car; it would have if he had collision coverage. He will, however, recoup some of the value of his vehicle—up to $3,500—because he has uninsured motorist coverage. Bob is stuck paying the rest out of pocket. And Larry gets away with paying nothing for the accident he caused.
This is an unfortunate situation, but it’s not uncommon. If your head is spinning after all of this, or you’re worried that your policy doesn’t offer you the coverage you need to have peace of mind, we’d love to step in and help you sort everything out. First, we’ll take a look at your current car insurance policy. Then we can make recommendations on what to change or where to look for better coverage.
Feel free to call us any time at (888) 411-1710 or shoot us an email at info@coveragedirect.com. You can also fill out a quick form on our auto insurance page to start the quote process. Once we understand exactly what you’re looking for, we’ll do the research and shopping for you. We’ll pull from a pool of top-rated insurance companies to find the best coverage for your specific situation.
[1] “Uninsured Motorist Property Damage Coverage.” CarInsurance.com
[2] “Uninsured Motorists.” National Association of Insurance Commissioners
[3] “What Is Uninsured Motorist Coverage?” Allstate
[4] “What Is Collision Insurance?” Allstate
