How does auto insurance work?

This is Part 2 in our four part series on Auto Insurance. We have found that many insurance consumers have no idea how their auto insurance works and how it can be used to protect them. For that reason, we wanted to write a series to help make sure that people are making well-informed decisions when it comes to purchasing their auto insurance and choosing the coverage that best fit their needs.

Uninsured/Underinsured Motorist Coverage

Our first post in this four part series on auto insurance was about liability coverage. Unlike liability (the coverage you carry for the other party if you are at-fault in an accident), uninsured/underinsured motorist coverage is not required by law. This is an optional coverage on your auto insurance that protects you in case you are in an accident, the other party is at-fault, and the other party does not carry the legal insurance or does not have enough insurance to cover your bodily injuries and property damage. Additionally, this coverage would protect you if you are involved in a hit and run accident as there would be no other party to collect from.

Uninsured/Underinsured motorist coverage is structured in basically the same way as liability coverage. You could be covered $30,000/$60,000/$25,000. This means if you were in an accident and the other party was at-fault and a) does not have insurance b) does not have enough insurance to cover your damages or c) it is a hit and run accident, then your auto insurance policy would pay up to $30,000 per person’s injuries in your vehicle. The policy would pay up to $60,000 per accident for injuries to people in your vehicle. And your policy would pay up to $25,000 per accident to repair damages to your vehicle.

Imagine if you did not have uninsured/underinsured motorist coverage on your auto insurance policy and you were struck by another vehicle who fled the scene. You and your two children were injured in the accident and had to go to the hospital. One of your children’s injuries required surgery. On top of these costs, your vehicle cost $10,000 to repair. If you didn’t have good health insurance and were not carrying collision coverage (which we will explain in part 4) on your vehicle then you would be out of luck. All of the medical expenses and the cost to repair your vehicle would fall to you and in some cases could be crippling to your family’s financial well-being.

You cannot have uninsured/underinsured motorist coverage limits higher than the liability coverage limits you carry on your auto insurance policy. So, if you have 50/100/25 limits of liability then you could have no higher for your uninsured/underinsured coverage limits. As you can see in the example above, the slightly higher premium you pay each month to have uninsured/underinsured motorist coverage on your auto insurance is worth it in order to protect your family from a very difficult situation. These types of situations are things we cannot foresee and are completely out of our control. It is better to plan ahead and make sure another person’s irresponsibility does not cost you and your family.

Our next post will explain how collision and comprehensive coverage on your auto policy can be used to protect your family and your vehicle. Stay tuned!