Understanding the difference between uninsured and underinsured coverage


Before you decide on purchasing auto insurance, it is important to understand the auto insurance basics and the basic differentiation between the various types of coverage – uninsured or underinsured for instance. The uninsured or underinsured coverage basically covers the damage that is caused in an accident, where the driver is either not insured (uninsured) or is less insured (underinsured).

Any accident is totally unpredictable and the risk is doubled when the accident involves a driver who is uninsured as well as the victim, and both parties can be put through severe financial crisis. This is normally the case with uninsured drivers. Sometimes, the estimated coverage may also be inadequate to cover the actual claims. In order to deal with these situations, the underinsured auto insurance coverage has been designed.

To make things easier, the underinsured and uninsured auto insurance coverage has been put into two sub-categories known, as PIP or personal injury protection or bodily injury coverage, and property damage coverage. The PIP cover takes care of the cost of medical expenses related to the injured driver or any other passengers in the vehicle and the property damage cover will cover expenses related to the damage to property of the victim. So, together this coverage aims at providing overall coverage to the injured party in case the at-fault party has no means to cover the damages.

These situations largely occur due to the overall negligence of people as they are not adequately insured. Hence, under such circumstances some relief needs to be provided to the victims and that is the reason for designing this coverage.

So, in a nutshell, the party at fault will have to actually provide for the damage caused to life and property. But in case of an underinsured or uninsured driver being involved in an accident and if the at-fault driver has inadequate coverage to pay for the loss, then it is covered by uninsured or underinsured coverage.

The underinsured or uninsured auto insurance coverage is an add-on feature or in other words optional. Hence, many motorists don’t bother to add this coverage onto their policies. Very often people assume that it is sufficient to take the insurance cover that is mandated as per the state laws. But that is not the right thing to do, as it could lead to a severe financial crisis if you are involved in a motorist who is uninsured or underinsured.

One has to bear a couple of things in mind while choosing the insurance policy. First of all, it is important to be aware of the state laws and purchase the minimum requirement as per the state laws and then one has to take the additional coverage as well. This is especially true if you have just purchased a brand new vehicle that has a very high value. Then you will require more coverage than the minimum prescribed by the state. However, if you have an old vehicle that is not worth much in terms of value, then you could avoid most of the add-ons and go for just the basic coverage.