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

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Uninsured and Underinsured Motorist Coverage

As a no-fault insurance state, Michigan motorists must first turn to their own insurers to collect compensation for expenses stemming from an auto accident. Personal injury protection (PIP) benefits pay for an injured party’s medical expenses, wage loss, attendant care, and replacement services after a crash. It doesn’t matter who was at fault for the accident. You can still get these benefits.

Unfortunately, PIP benefits are not always enough to cover a victim’s losses. In cases of serious injury or death, Michigan personal injury law also allows injured individuals to file a lawsuit for pain and suffering damages and excess wage loss and medical expenses against the at-fault driver’s insurance company.

While PIP is helpful, what happens if a driver has no insurance? Or not enough insurance to cover the extent of your injuries? That’s where uninsured and underinsured motorist coverage comes into play ― and you absolutely need it.

What is Uninsured Motorist Coverage?

Uninsured motorist coverage (UM) is optional insurance you can purchase to protect yourself if you’re hit by a driver without insurance.

Buying auto insurance is mandatory in Michigan, but people break the law all the time. A 2021 report from the Insurance Research Council found Michigan had the second-highest percentage of uninsured drivers in the nation. The data showed more than a quarter of motorists in the state carried no insurance.

Here’s the truth about uninsured motorist coverage:

  • It allows you to recover money for pain and suffering and certain financial losses that the negligent driver’s insurance company would have normally paid.
  • For policies issued or renewed after July 1, 2020, UM also enables victims to recover money for excess no-fault PIP medical benefits.
  • UM is pretty cheap ― typically around $50 to $75 per year.
  • Uninsured motorist coverage can also provide compensation for injuries sustained in hit-and-run accidents.

Without uninsured motorist coverage, you could find yourself paying for excess medical treatment and other financial losses out of pocket.

What is Underinsured Motorist Coverage?

Underinsured motorist coverage (UIM) allows you to pursue compensation from your insurance company when the at-fault driver has inadequate insurance to cover your losses. Like UM, it is optional in Michigan.

UIM typically applies when the negligent driver bought the minimum bodily liability insurance required by state law. The minimum limits are $250,000 for one person injured or killed in an accident and $500,000 per accident if multiple people are hurt or killed.

However, the law gives people the option to purchase limits as low as $50,000 and $100,000. Catastrophically injured victims suffer losses far greater than those amounts. A negligent driver with these minimums would be grossly underinsured in serious injury cases.

If you’re in a wreck with an underinsured driver, you will first pursue compensation from their insurance company, but promptly put your insurance company on notice that you may have a UIM claim. If the value of your losses and injuries exceeds the amount of the insurance limits of the at-fault driver, then your UIM coverage will provide additional compensation up to the policy limits of your coverage.

Let’s say your damages equal $500,000. If the at-fault driver has $250,000 in coverage and your UIM limits are $500,000, then you could collect $250,000 from the driver’s policy and your UIM will potentially pay you another $250,000.

It’s critical to speak with a Michigan car accident lawyer before settling with the at-fault driver’s insurance company. The fine print of some UIM policies requires victims to get consent before agreeing to a settlement. Failing to gain approval could prevent you from getting the UIM compensation you would otherwise have been entitled to.

Why is Uninsured/Underinsured Motorist Coverage a Good Idea?

No crystal ball can tell us whether we’ll get hurt in a car wreck. And if we are, there’s no guarantee the at-fault driver will have insurance – remember, 25% of drivers here in Michigan are not insured. The best way to shield yourself from devastating financial harm is by purchasing as much insurance as you can afford.

Don’t make the mistake of thinking UM/UIM coverage is unimportant because it’s optional. States make insurance decisions that don’t always look out for the best interests of their citizens. And in states with a high number of uninsured drivers (like Michigan), UM/UIM is your best bet at recovering maximum compensation after a crash.

Contact a Michigan Car Accident Attorney for Additional Information

Christensen Law is a highly respected personal injury law firm with offices in Detroit, Southfield, Ann Arbor, and Grand Rapids. If an uninsured or underinsured driver hits you, our car accident lawyers can review your insurance policy(s) and identify every source of compensation for you. Call or contact us today for a free consultation.