Uninsured motorists (UM) coverage provides insurance protection for an insured (and any passenger) who is injured in an auto accident by an at-fault driver with no auto liability coverage. In most states, UM coverage indemnifies the insured for bodily injury only, however a few states allow coverage for damage to the insured's property as well.
Generally, a vehicle is considered uninsured if: 1) the accident was a hit-and-run, and the driver cannot be found and identified; 2) insurance for the vehicle is not in force; 3) if the insurance is less than the financial responsibility law of the state where the accident happened; or 4) if the insurance company denies the coverage or becomes insolvent.
Each state has its own laws regarding whether UM coverage is compulsory or optional. If it is optional, the coverage can be rejected by the policyholder once offered by the insurer. If the coverage is mandatory according to state law, the minimum limit to be carried is dictated by each individual state as well.
Here's an example of how this coverage can work for you:
Let's say you are the named insured on a commercial auto policy that includes UM coverage. One day while driving your truck, you collide with a four-wheeler that ran a stop sign at a busy intersection. You find out the four-wheeler has no liability insurance, and that leaves you wondering who's going to pay for your injuries.
Assuming the driver of the four-wheeler is found to be legally liable, the Uninsured Motorists coverage on your policy will pay for your injuries. If you're in a state that allows indemnification for damage to your property, it will pay to repair your truck as well. However, if your state allows payment for bodily injury only, you'll have to collect under the physical damage portion of your policy, and pay the applicable deductible, in order to get your truck fixed. Your alternative would be to get the uninsured driver to pay for the repairs out of his or her own pocket.
If the tables were turned, and you were the one who ran the light, there's no use trying to get your UM coverage to pay for your injuries. Even though the driver of the four-wheeler was uninsured, he or she wasn't legally liable for the accident, so you'll either have to pay your own medical bills or claim them under your medical or occupational accident insurance policy.
Underinsured motorists (UIM) coverage pays the difference between the insured's actual damages for bodily injury and the amount of liability insurance carried by the at-fault driver, up to the limits of the insured's UIM coverage.
This is different from uninsured motorists (UM) coverage because the at-fault driver carries liability coverage – just not enough to cover your damages.
Underinsured motorists (UIM) coverage is compulsory in some states and optional in others, according to individual state laws. However, the fact that UM is mandatory in a state does not necessarily mean that UIM is also required, or vice versa. You'll need to check your particular state's laws to be sure.
As an example of the way in which UIM works, let's suppose you are the named insured on a policy that carries $100,000 UIM coverage. The driver of another vehicle crosses the median strip and collides with your truck, causing bodily injuries to you amounting to $85,000. However, the at-fault driver has an auto liability policy with maximum limits of only $50,000. How much will your UIM coverage pay for your damages?
The answer is $35,000, which is the difference between your actual damages for bodily injury, and the limit of liability insurance carried by the at-fault driver.
In order to provide an extra twist to this scenario, let's say that your damages for bodily injury amounted to $200,000. How much would your UIM coverage pay in this case?
Even though the difference between your damages and the limits of the at-fault driver's liability policy is $150,000, your UIM will only reimburse you for the $100,000 limit that your coverage provides.
Please note that I have given you a generalized explanation of the way in which UM/UIM can work for you. There is a great deal of variation among the states regarding the laws that apply to these coverages, so be sure to check with your agent for specific details.
The Owner-Operator Independent Drivers Association (OOIDA) wants you to know about the insurance coverages that can protect your trucking operation. Call us at 800-715-9369 for answers to your insurance questions.