What happens when you get hit by someone that doesn’t have insurance?
Even if you have insurance, you still might have to pay.
Picture this. You’re on your way home from work—maybe you’re exhausted and just ready to be home, or maybe you’re jamming to your favorite song with the windows cracked. Then, you see it: an endless sea of red brake lights ahead of you.
As you slow for oncoming traffic and begin to let out a sigh, you hear a loud crunch from and a tremendous force lunges you forward in your seat. Stunned and shaken up, you look up in your rearview mirror and realize you’ve just been rear-ended.
You automatically reach for your license and insurance information and hop out of your car to survey the damage. Then, you emotionally prepare to begin exchanging information with the at-fault driver. At least this one’s not on you, right?
Worst case scenario
Well, that’s a best-case scenario, but instead, you learn that the driver that rear-ended you is not insured and doesn’t have money to front the cost of repairs. Looks like not all drivers on the road are as conscientious and responsible as you. Now what?
It may surprise you, but regular liability car insurance will only cover you for accidents for which you are at-fault. If you don’t have Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage, you could be stuck paying for the costs from an accident that wasn’t your fault on your own.
What can you do if you’re in an accident with an uninsured driver?
If you don’t have Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage and the at-fault driver doesn’t have the money to pay for the expenses, you have three available options:
- Cover the costs out-of-pocket: You would have to cover the cost of repairing or replacing your vehicle yourself. If you sustained injuries in the accident that required medical treatment, you could utilize your health insurance—but pay later with increased premiums. Having to fork out money (and time) for someone else’s mistake is not just a drag, it can be a major financial burden.
- File a lawsuit: Your other option would be to file a lawsuit against the at-fault driver or car owner, but this can be a lengthy and expensive process. And, it doesn’t always work–a common reason people drive uninsured is because they can’t afford monthly insurance payments. If your damages are so high in cost that you’re filing a lawsuit, it’s unlikely the uninsured motorist will be able to compensate you for your loss with their available assets. Unfortunately, there’s not much the courts can do if the uninsured motorist cannot cover the damages out-of-pocket. So you’ll be awarded what they do have, but will be stuck paying for costs beyond that.
- Collision coverage: If you have collision coverage, it can cover the cost of property damage (up to your policy limits) minus the cost of your collision deductible. It will not cover costs incurred from bodily injury.
The best option for dealing with an uninsured or underinsured motorist is to purchase UM/UIM coverage before the collision ever occurs, but this takes some planning ahead.
How to protect yourself
If you’ve read some of our other Resource Hub posts, you know that we stress income being the most important wealth-building asset.
If you’re injured in a car accident, you can be left with no choice but to seek out expensive medical treatment and/or take time off work to recover. Ensuring you are prepared for accidents is an important part of financial freedom.
UM and UIM coverage are similar, but they are not the same. In deciding which plan is right for you, it’s important to know what exactly they are and what they can do for you.
What is UM Coverage?
Uninsured Motorist, or UM, coverage covers you when you are involved in an accident caused by an uninsured driver, meaning the other driver did not have liability car insurance at the time of the accident.
When you’re involved in an accident caused by an uninsured motorist, you can immediately file a first party UM claim with your insurance. If you can prove the at-fault driver is uninsured (or was uninsured at the time of the accident), you can collect compensation from your own insurance company for costs you incurred from injuries and/or property damage.
What is UIM Coverage?
Underinsured Motorist, or UIM, coverage covers you for any expenses that exceed the policy limits of the at-fault driver’s liability car insurance. This is to cover you in the event that the at-fault driver’s policy isn’t big enough to cover all your medical bills and/or property damage.
You file a UIM claim the same way you file a UM claim, but instead of filing a claim right away (as you would with a UM claim), you will file a third party claim with the at-fault driver’s insurance, first. Once it has been established that your costs exceed their coverage, you can file a first party UIM claim with your own insurance company.
One of the biggest benefits of purchasing UM/UIM coverage is that you can be compensated for missed wages and pain and suffering. If you sustained injuries in an accident that caused you to miss time off work, your insurance company will pay you your regular wages for the days you missed.
How to purchase UM/UIM coverage
When you purchase UM coverage, the policy limits will be displayed by two numbers in a dash (like, 15/30 or 100/500). The first number represents the total amount of money your insurance carrier will cover for medical expenses involved in the accident per person. The second number indicates the total amount that your insurance company will cover for the whole accident.
A practical example
For example, if you had a 15/30 policy, were rear-ended by an uninsured motorist, and you and two of your family members were injured in the accident, your insurance company would cover your and your two family members’ medical expenses up to $15,000 for each of you, but only up to $30,000 for all three of you.
So, if your medical expenses costed $5,000, your grandmother’s costed $15,000, and your uncle’s costed $8,000, the medical treatment the three of you received would be covered by your insurance company. The medical treatment you three received could not exceed $30,000, or any left over expenses would not be covered under your plan.
When purchasing UIM coverage, the policy limits are displayed and understood the same way as UM policy limits.
Remember that, like regular liability car insurance, you are only covered up to your policy limits. Also, keep in mind that insurance companies do not retroactively cover incidents. So if you purchase UM or UIM coverage immediately after an accident, you won’t be covered for that accident—only future accidents.
Important to note
One last important thing to note about UM/UIM coverage is that most UM/UIM insurance policies provide coverage for bodily injury only. If you want to make sure you’re covered for property damage in addition to the bodily injury coverage, it can be added to your plan so long as you communicate with your insurance agent. Make sure to clarify the precise coverage you’re looking for with your insurance agent.
Do I have to purchase it?
Well, that depends. Only 18 U.S. states mandate drivers to purchase UM/UIM coverage in addition to liability car insurance, and what policy limit these states require you to purchase varies. If you aren’t required by law to purchase UM/UIM coverage, the decision to purchase the extra coverage is entirely up to you.
The idea of paying extra costs every month for other driver’s negligence sounds awful—we know. You’re probably wondering “What are the chances I’d get hit by an uninsured or underinsured motorist, anyway?” Well, the odds may be higher than you’d think.
Do people actually drive uninsured?
The short answer is: yes, they do.
Unless you live in New Hampshire or Virginia, the law requires you to have liability car insurance. By breaking the law and driving uninsured, drivers run the risk of incurring a steep fine, getting your license suspended or even losing your car (although punishments vary from state to state). Yet, it turns out that roughly 13% of U.S. drivers nationwide are uninsured, according to the Insurance Research Council. That’s 1 in 8 people.
It’s also worth mentioning that there are plenty of people on the road with minimal policies. These drivers shouldn’t be condemned for their choice in coverage—they are following the law, just likely choosing plans with monthly payments they can afford. Still, if they are at fault for accidents that caused major property damage (like a totaled car) or serious injuries, their minimal policies may not cut it.
Protecting yourself and your assets is a key part of your journey towards financial freedom. If you should ever be the victim of a hit-and-run or get hit by an uninsured or underinsured motorist, you could have to pay for property damage and medical expenses out of your own pocket or miss out on income from missing time off work.
With WizeFi’s software, you don’t have to guess how much insurance coverage will fit into your monthly budget. It can let you know exactly how much to spend month-to-month or where you can cut costs in other areas of your life to be able to afford the coverage you’re comfortable with.
What’s the next step?
So if you’ve decided that UM/UIM coverage is worthwhile for you, what’s the next step? Contact your current car insurance company to get a quote and get answers to questions that are specific to your insurance plan and state. If you want more detailed information, you can use WizeFi’s connect with a pro feature to get in touch with an insurance expert in your state.
Take advantage of the resources available to you, and have your own back!