Discover the surprising difference between underinsured and uninsured motorist coverage and why you need both.
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Understand the difference between uninsured and underinsured motorist coverage. | Uninsured motorist coverage protects you if you are in an accident with a driver who does not have insurance. Underinsured motorist coverage protects you if you are in an accident with a driver who has insurance, but their liability insurance limits are not enough to cover the damages. | The risk of being in an accident with an uninsured or underinsured driver is higher than you might think. |
| 2 | Determine the amount of bodily injury protection and property damage coverage you need. | Bodily injury protection covers medical expenses and lost wages for you and your passengers if you are in an accident. Property damage coverage covers the cost of repairing or replacing your vehicle and any other property that was damaged in the accident. | The amount of coverage you need depends on your personal financial situation and the value of your assets. |
| 3 | Choose a deductible amount limit. | The deductible is the amount you pay out of pocket before your insurance coverage kicks in. Choosing a higher deductible can lower your monthly premiums, but it also means you will have to pay more if you are in an accident. | Make sure you choose a deductible amount that you can afford to pay if you are in an accident. |
| 4 | Consider adding hit-and-run coverage. | Hit-and-run accidents are when the other driver leaves the scene of the accident without providing their contact information. Hit-and-run coverage can help cover the cost of damages if you are in this type of accident. | Hit-and-run accidents are more common than you might think, especially in urban areas. |
| 5 | Decide if you need medical expenses coverage or personal injury protection. | Medical expenses coverage pays for medical expenses for you and your passengers if you are in an accident, regardless of who is at fault. Personal injury protection covers medical expenses, lost wages, and other expenses related to the accident. | If you have good health insurance, you may not need medical expenses coverage. Personal injury protection is only available in certain states. |
| 6 | Consider adding a comprehensive or collision insurance policy. | Comprehensive insurance covers damage to your vehicle that is not caused by an accident, such as theft or vandalism. Collision insurance covers damage to your vehicle that is caused by an accident. | Adding these policies can increase your monthly premiums, but they can also provide additional protection for your vehicle. |
Contents
- What are Liability Insurance Limits and Why Are They Important for Motorist Coverage?
- Property Damage Coverage: What It Covers and How It Protects You
- Hit-and-Run Accidents: How Uninsured Motorist Coverage Can Help You
- Personal Injury Protection vs Uninsured/Underinsured Motorist Coverage: What’s the Difference?
- Collision Insurance Policy
- Common Mistakes And Misconceptions
- Related Resources
What are Liability Insurance Limits and Why Are They Important for Motorist Coverage?
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Understand what liability insurance limits are | Liability insurance limits refer to the maximum amount an insurance company will pay for bodily injury or property damage caused by the policyholder | Without understanding liability insurance limits, policyholders may not have adequate coverage in the event of an accident |
| 2 | Determine the minimum coverage requirements in your state | Each state has its own minimum coverage requirements for liability insurance | Failing to meet the minimum coverage requirements can result in fines, license suspension, or legal action |
| 3 | Consider purchasing higher liability limits | Higher liability limits provide greater protection in the event of an accident | Higher liability limits may result in higher premiums |
| 4 | Understand the importance of liability insurance limits for motorist coverage | Liability insurance limits are important for motorist coverage because they determine the maximum amount an insurance company will pay for bodily injury or property damage caused by the policyholder | Without adequate liability insurance limits, policyholders may be personally responsible for any damages that exceed their coverage |
| 5 | Consider purchasing uninsured and underinsured motorist coverage | Uninsured and underinsured motorist coverage provides protection in the event that the other driver involved in an accident does not have adequate insurance coverage | Uninsured and underinsured motorist coverage may result in higher premiums |
| 6 | Understand the claim settlement process | The claim settlement process involves filing a claim with the insurance company, providing evidence of damages, and negotiating a settlement | Failing to follow the claim settlement process correctly can result in a denied claim |
| 7 | Work with a liability claim adjuster | A liability claim adjuster can help policyholders navigate the claim settlement process and negotiate a fair settlement | Working with an inexperienced or unhelpful claim adjuster can result in a lower settlement |
| 8 | Consider purchasing excess liability insurance or an umbrella policy | Excess liability insurance or an umbrella policy provides additional liability coverage beyond the limits of a standard policy | Excess liability insurance or an umbrella policy may result in higher premiums |
| 9 | Understand the importance of personal assets protection | Personal assets protection refers to the protection of a policyholder’s personal assets in the event of a lawsuit | Without adequate personal assets protection, policyholders may be at risk of losing their assets in a lawsuit |
| 10 | Consider purchasing legal defense costs coverage | Legal defense costs coverage provides coverage for legal fees and expenses in the event of a lawsuit | Legal defense costs coverage may result in higher premiums |
Property Damage Coverage: What It Covers and How It Protects You
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Understand what property damage coverage is | Property damage coverage is a type of auto insurance that covers the cost of damage to someone else’s property caused by an accident you are responsible for. This can include damage to another vehicle, a fence, a building, or any other type of property. | Without property damage coverage, you could be held personally responsible for the cost of repairing or replacing the damaged property. |
| 2 | Know the types of property damage coverage | There are two types of property damage coverage: actual cash value (ACV) and replacement cost value (RCV). ACV covers the cost of the damaged property at its current value, while RCV covers the cost of replacing the damaged property with a new one. | Choosing the right type of coverage depends on your budget and the value of your vehicle. RCV is more expensive but provides better protection. |
| 3 | Understand the coverage limits | Property damage coverage has a limit, which is the maximum amount the insurance company will pay for damages. The limit is usually listed as a dollar amount per accident. | It’s important to choose a coverage limit that is high enough to cover the cost of damages in case of an accident. If the damages exceed the coverage limit, you will be responsible for paying the difference. |
| 4 | Know the exclusions and limitations | Property damage coverage has exclusions and limitations, which are situations where the insurance company will not pay for damages. Exclusions can include intentional damage, damage caused by a driver who is not listed on the policy, and damage caused by a driver who is under the influence of drugs or alcohol. | It’s important to read the policy carefully to understand the exclusions and limitations. |
| 5 | Understand the claim process | If you are involved in an accident that causes property damage, you should contact your insurance company as soon as possible. The insurance company will investigate the accident and determine the amount of damages. You will need to pay the deductible before the insurance company pays for the damages. | It’s important to document the accident and gather as much information as possible, including the names and contact information of any witnesses. This will help the insurance company determine who is at fault and how much to pay for damages. |
Hit-and-Run Accidents: How Uninsured Motorist Coverage Can Help You
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Contact the police | A police report is necessary to file an uninsured motorist claim | Delay in reporting the accident can lead to difficulty in proving the accident |
| 2 | Gather evidence | Witness testimony and vehicle registration number can help in identifying the hit-and-run driver | Lack of evidence can lead to difficulty in proving the accident |
| 3 | Contact your insurance company | Uninsured motorist coverage can provide compensation for bodily injury and property damage | Lack of uninsured motorist coverage can lead to financial burden |
| 4 | File a claim | The claim process for uninsured motorist coverage is similar to that of liability insurance | Failure to follow the claim process can lead to denial of compensation |
| 5 | Seek legal representation | Legal representation can help in negotiating with the insurance company and obtaining fair compensation | Lack of legal representation can lead to inadequate compensation |
- Underinsured motorist coverage may not provide sufficient compensation in hit-and-run accidents.
- Uninsured motorist coverage can also provide compensation in accidents involving uninsured drivers.
- Premiums for uninsured motorist coverage may vary depending on the coverage limits.
- Uninsured motorist coverage may not cover hit-and-run accidents if the driver is identified and has insurance.
Personal Injury Protection vs Uninsured/Underinsured Motorist Coverage: What’s the Difference?
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Understand the difference between Personal Injury Protection (PIP) and Uninsured/Underinsured Motorist Coverage (UM/UIM) | PIP covers medical expenses and lost wages for you and your passengers, regardless of who is at fault. UM/UIM covers bodily injury and property damage caused by an uninsured or underinsured driver. | Not having enough coverage can leave you with out-of-pocket expenses. |
| 2 | Know the coverage limits and exclusions of PIP and UM/UIM | PIP coverage limits vary by state and may have exclusions for certain types of injuries or treatments. UM/UIM coverage limits may not be enough to cover all damages in a serious accident. | Not understanding your coverage limits and exclusions can lead to unexpected expenses. |
| 3 | Understand how PIP and UM/UIM interact with other types of insurance coverage | PIP may be required in no-fault insurance states, while UM/UIM is optional but highly recommended. Bodily injury liability insurance and property damage liability insurance are separate from PIP and UM/UIM. | Not having the right combination of insurance coverage can leave you vulnerable to financial loss. |
| 4 | Know the roles of the PIP claim adjuster and the underwriting and claim settlement processes for UM/UIM | The PIP claim adjuster evaluates your claim and determines the amount of compensation you are entitled to. The underwriting process for UM/UIM involves assessing your risk factors and setting your premiums and coverage limits. The claim settlement process for UM/UIM involves negotiating with the other driver’s insurance company or filing a lawsuit. | Not understanding the claims process can lead to delays or denials of compensation. |
| 5 | Consider the cost and benefits of PIP and UM/UIM | PIP may have higher premiums but provides more comprehensive coverage, while UM/UIM may have lower premiums but only covers damages caused by uninsured or underinsured drivers. | Choosing the right insurance coverage requires balancing cost and benefits. |
Collision Insurance Policy
| Step | Action | Novel Insight | Risk Factors |
|---|---|---|---|
| 1 | Determine if collision insurance is necessary | Collision insurance covers damages to your own vehicle in the event of an accident, regardless of who is at fault. If you have a newer or more expensive car, collision insurance may be necessary to protect your investment. | Collision insurance can be expensive and may not be necessary for older or less valuable vehicles. |
| 2 | Choose a deductible amount | A deductible is the amount you pay out of pocket before your insurance coverage kicks in. Choosing a higher deductible can lower your premiums, but also means you will pay more out of pocket in the event of an accident. | Choosing a high deductible can be risky if you cannot afford to pay it in the event of an accident. |
| 3 | Understand the coverage limits | Collision insurance policies have coverage limits, which is the maximum amount the insurance company will pay out for damages. Make sure the coverage limits are sufficient to cover the cost of repairs or replacement of your vehicle. | If the coverage limits are too low, you may be responsible for paying the difference out of pocket. |
| 4 | Know the difference between actual cash value and total loss | Actual cash value is the value of your vehicle at the time of the accident, taking into account depreciation. Total loss occurs when the cost of repairs exceeds the actual cash value of the vehicle. | If your vehicle is declared a total loss, you may only receive the actual cash value, which may not be enough to replace your vehicle. |
| 5 | Understand salvage titles | If your vehicle is declared a total loss, it may be given a salvage title, which means it has been deemed a total loss by the insurance company. Salvage titles can lower the value of your vehicle and make it difficult to sell or insure in the future. | If you plan to keep your vehicle after it has been declared a total loss, you may need to apply for a salvage title. |
| 6 | Consider gap insurance | Gap insurance covers the difference between the actual cash value of your vehicle and the amount you owe on your car loan. This can be useful if you owe more on your car loan than your vehicle is worth. | Gap insurance can be expensive and may not be necessary if you owe less on your car loan than the actual cash value of your vehicle. |
| 7 | Review exclusions and endorsements | Exclusions are situations or events that are not covered by your insurance policy. Endorsements are additional coverage options that can be added to your policy for an additional cost. Make sure you understand both before purchasing a collision insurance policy. | Failure to understand exclusions and endorsements can result in unexpected out-of-pocket expenses in the event of an accident. |
| 8 | Understand the claim settlement process | In the event of an accident, you will need to file a claim with your insurance company. The claim settlement process can vary depending on the insurance company and the circumstances of the accident. Make sure you understand the process before purchasing a collision insurance policy. | Failure to understand the claim settlement process can result in delays or denials of your claim. |
| 9 | Know the covered perils | Covered perils are the events or situations that are covered by your insurance policy. Make sure you understand what is covered and what is not covered before purchasing a collision insurance policy. | Failure to understand covered perils can result in unexpected out-of-pocket expenses in the event of an accident. |
| 10 | Consider accident forgiveness | Some insurance companies offer accident forgiveness, which means your rates will not increase after your first at-fault accident. This can be useful if you are a new driver or have a history of accidents. | Accident forgiveness may not be available from all insurance companies and may come with additional costs. |
Common Mistakes And Misconceptions
| Mistake/Misconception | Correct Viewpoint |
|---|---|
| "I don’t need uninsured/underinsured motorist coverage because I have full coverage." | Full coverage only refers to the combination of liability, collision, and comprehensive insurance. It does not include uninsured/underinsured motorist coverage. |
| "Uninsured/Underinsured motorist coverage is too expensive." | Uninsured/Underinsured motorist coverage can be affordable and may even save you money in the long run if you are involved in an accident with an uninsured or underinsured driver. |
| "Uninsured drivers are rare so I don’t need this type of coverage." | According to a study by the Insurance Research Council, approximately 1 in 8 drivers on the road do not have insurance. This means that there is a significant chance that you could be involved in an accident with an uninsured driver. |
| "If I am hit by an uninsured driver, my health insurance will cover my medical expenses." | While your health insurance may cover some of your medical expenses after being hit by an uninsured driver, it likely won’t cover all costs such as lost wages or pain and suffering damages. Uninsured/Underinsured motorist coverage can help fill these gaps. |
| "My state doesn’t require me to have this type of coverage so I don’t need it." | Just because your state doesn’t require you to have this type of coverage doesn’t mean it’s not important or necessary for your specific situation. |