Underinsured & Uninsured Motorist Coverage: What Is It? Why Do You Need It?

When you’re injured in a Michigan car accident, your own no-fault insurance company pays personal injury protection (PIP) benefits. These benefits include medical costs and other allowable expenses, work-loss benefits and replacement services.

However, in cases where a person has died, been disabled or suffered a serious impairment in an auto accident, it may be necessary to seek damages from the person who caused the accident – that is, the at-fault driver. In these unfortunate instances, an auto negligence lawsuit may be filed against the negligent driver and his insurance carrier.

But what happens if an at-fault driver has lousy auto insurance coverage? What if the at-fault driver doesn’t have any car insurance at all?

That’s where uninsured motorist coverage and underinsured motorist coverage come into play. It’s important to know that these two types of insurance are not part of your standard no-fault policy. Rather, they must be purchased separately and operate in addition to your existing no-fault coverage.

Here at Christensen Law, we strongly encourage Michigan motorists to purchase both uninsured and underinsured motorist coverage. If you do not obtain these optional coverages, then you are not fully protecting you and your loved ones in the event of a car accident.

Uninsured Motorist Coverage

Simply put, an uninsured motorist (UM) policy protects you from persons who are driving without any auto insurance.

Even though no-fault insurance is required by state law, Michigan ranks 4th in the nation for the number of drivers operating their vehicles without insurance. According to the most recent statistics, nearly 21 percent of Michigan drivers do not have insurance coverage.

When a driver negligently causes an accident, that driver and his insurance company can be sued for two types of damages: 1) excess economic loss and 2) non-economic loss (i.e., pain and suffering). These damages are in addition to the no-fault benefits you receive from your own insurer.

But if the at-fault driver doesn’t have car insurance, you won’t be able to get these additional damages – that is, unless you’ve purchased an uninsured motorist policy. If you have uninsured motorist coverage, it will kick in if you are hurt in a crash with an uninsured, negligent driver.

How does uninsured motorist coverage work? After the crash, you file a claim with the insurance carrier that sold you the uninsured motorist policy. In many instances, this will be your own no-fault insurer, although some insurance companies do not provide uninsured motorist coverage. The insurer that provided the uninsured motorist policy then basically takes the place of the uninsured (at-fault) driver and pays damages above and beyond the PIP benefits that you received.

Believe it or not, uninsured motorist coverage is quite affordable. A good policy can usually be purchased for about $30-$40 a year.  

Underinsured Motorist Coverage

Like uninsured motorist coverage, underinsured motorist coverage offers Michigan motorists extra protection and is purchased in addition to a standard no-fault policy. However, while uninsured motorist coverage protects you from drivers without any insurance, an underinsured motorist policy protects you from drivers with bad insurance.

Why would a driver have shoddy insurance? Because Michigan motorists are only required to carry a minimum of $20,000 in auto insurance coverage. Many of these bare-bones policies are capped at a payout of $40,000 per accident, no matter how seriously injured someone may be.

When it comes to underinsured motorist coverage, there are some critical things to remember. First, certain prerequisites must usually be met before making a claim, such as exhausting the negligent driver’s liability limits. Also, an underinsured motorist policy may include specific conditions that must be satisfied before a claim can be filed, like a time limit for notifying the insurance carrier of the potential claim. So be sure to read your underinsured policy carefully and be aware of any conditions that apply.

Similar to uninsured motorist coverage, underinsured coverage is quite affordable. Drivers can typically get a decent policy for around $50-$60 a year.

If you’ve been injured in a Michigan car accident and think you may have an auto negligence claim, or have questions about your uninsured and underinsured motorist coverage, the Detroit car accident attorneys at Christensen Law can help. Contact us today.