Do I Need Uninsured Motorist Coverage?

Insurance Q&A: “Do I need uninsured motorist coverage?”

Uninsured motorist coverage and underinsured motorist coverage are available in most states at the moment. While this coverage is not mandatory in every state, auto insurance companies typically have to offer it and I highly recommend you purchase it in an amount equal to your liability limits.

If you don’t want it, you have to specifically sign a rejection form stating it was offered to you and that you declined it; doing so protects the insurance company and the insurance agent.

This procedure is necessary because consumers often reject uninsured motorist coverage for a variety of reasons. Many believe they don’t need it, don’t want to pay extra for it because it isn’t mandatory, or simply don’t understand it.


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Then there’s the odd chance the agent doesn’t mention it in order to offer a cheaper rate than the next guy.

But the problems begin when an accident occurs, and the at fault party leaves the scene (hit-and-run), doesn’t have insurance, or doesn’t have high enough liability limits to pay for the damages they caused.

In these cases, you may be left footing the bill. People typically cry foul at this point and blame the agent for not offering uninsured motorist coverage or explaining it in a manner that made its purchase seem necessary.

Recently I was involved in a hit-and-run situation and realized I was much better off for having the coverage…and here’s why.

My car was damaged while I was at a friend’s house for dinner. We didn’t notice it until after the guilty party had left the scene. As typical when a car accident occurs, we immediately called the police to fill out an accident report.

We filed the claim with our insurance company that evening. The claim process started and the damage was set to be covered by my “collision” coverage as part of my overall physical damage coverage.

Of course, the claim triggered my “collisiondeductible of $500 and was going to be counted as a not-at-fault claim by my insurer, which inevitably would raise my rates (even though the accident was not my fault!!!).

Without physical damage coverage, I would have been out of luck completely and would have had to pay for the whole thing out of my own pocket, which make the case for that coverage separately from uninsured motorist coverage.

Here is where the beauty of uninsured motorist coverage comes into play. Since I had the coverage, and filed the police report showing the damage was the result of a hit-and-run accident, my uninsured motorist coverage was triggered rather than my ‘OTC.”

The insurance company started the claim with “OTC” because the police report was not made available to them yet (it takes about three days to be filed).

The uninsured motorist coverage works differently than “OTC” in the following ways:

First, my deductible was reduced to $250, saving me $250 right off the top. Second, since the damage was not my fault (per the police report), it will not be counted against me in the form of additional premium when my policy renews.  Finally, the amount of money my insurance company covered for my rental car was increased as well, again, because the damage was not my fault.

This is a prime example, as with all insurance, of why it’s a good idea to have as much coverage as possible.

Without uninsured motorist coverage, I would have been on the hook for more than twice what I ended up paying.

Remember this the next time anyone tries to tell you uninsured motorist coverage is unnecessary if you have physical damage coverage on your vehicle.

You never know when you will come out of the grocery store to find your door smashed in and no note left on your windshield.

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6 Comments

  1. Guy November 1, 2014 at 12:24 pm -

    Let me tell you why I totally disagree that Uninsured Motorist (UM) coverage is a good financial decision.

    Without thinking about it, I was paying for UM for many years. As it turns out, it was costing me on average about $75 per year (with State Farm). After ten years I paid out about $750 for it. I then had an incident similar to yours and only saved $250 on the deductible (compared to $500 deductible on my collision coverage). Do the math: I paid $750 to save $250. Not a very good deal.

    As you even point out, “if” I’m in an accident and “if” I’m not in the wrong (at fault), then there’s barely a 14% chance the other driver won’t have insurance. At an additional cost of $750 over ten years, it’s worth the risk of not paying that extra amount, knowing the absolute worst I can do is put out “only” another $250 – the difference between the deductibles of the two coverages.

    The short of it is, UM is rarely needed. If you’re only carrying basic liability, then I’d say it might be worth it – provided you feel confident that if you’re ever in an accident, you’ll be the one who’s not at fault.

    And don’t get me started on that other car insurance “rip-off” – emergency medical coverage. A complete and total “waste of money” if you have an excellent medical insurance plan. You pay a lot for that and the most it might save is a couple of hundred dollars.

    Finally, even my own State Farm agent has agreed that my position on this is right. Thanks

    🙂

  2. Lillian Colon October 7, 2015 at 8:32 am -

    Good point Guy.
    What state do you reside in? Florida is a no fault state.
    Any difference in your opinion?

  3. Geoff Shepherd November 4, 2015 at 12:31 pm -

    I have collision coverage on my car. If it is damaged, my insurance company pays me, regardless of whether they can collect money from the other party. So, other than perhaps recovering my deductible, it makes no difference to me whether I have coverage for uninsured or underinsured motorists.
    I have a good health insurance package. If I am injured in a car accident, my health insurance will cover my medical expenses. (Again, aside from the deductible, which I can afford.)
    So why do I need this coverage?

  4. Dan Smith January 3, 2017 at 6:15 pm -

    Read the book ” Financial self defense” by Charles Givens.It is a real eye opener how accurate this book teaches you How uninsured/ underinsured works. Word for word from the book comparing it with my policy as I read my Auto policy : before you can tap into your uninsured motorist plan, you first have to exhaust the liability portion of your Insurance coverage. Then and only then can you claim any losses in the uninsured/underinsured…But The policy States you have to set up an arbitration hearing with your own Insurance company to pursue a claim. In other words your own insurance company is now your enemy, and you have to challenge them (SUE your own Insur, Co.) and try to receive any benefit coverage. I dropped the deceptive UNinsured/ UNDERinsured, and beefed up my collision and my Liability portion of my Auto policy. VERY deceptive, just like the stacking, double stack, and sometimes triple stack premium charge on a policy, a fee you pay which absolutely covers nothing, My opinion, theft by deception. Read the fine print in your policy, study it, research the information and decide for yourself, protect yourself from getting ripped.

  5. Licensed guy with lots of U coverage May 17, 2017 at 5:19 am -

    You are all confused big time! I am a licensed insurance producer with a property and casualty producers license. The first “guy” is referencing uninsured property damage coverage, which only costs about $10 semiannually, or $2/month. The third comment by “Geoff” is actually referencing uninsured motorist bodily injury or BI. This does cost about $75 semiannually, or $11/month, however instead of covering your car or property, uninsured motorist BI will cover costs associated to injuries sustained to your body that are caused by an uninsured or under insured motorist up to most likely $100,000 per person $300,000 per accident for $75 semiannually. And the comment from the last person is wrong, you do not have to arbitrate your company. Most companies do not want waste money on lawyers defending the inevitable payout because an ignorant person thinks they need to sue. They just settle. And if you are injured, have medical expenses, lose your job, have chronic pain, they most likely will gladly hand you $100,000 or even $300,000 to three people, because your case is actually worth about a million dollars, and you were the cheap moron that bought only $100,000 or listened to these three morons and declined the coverage all together. We make you sign a rejection form to save us the trouble of defending ourselves from your broke numb injured self. I carry $1,250,000 uninsured motorist. So BUY THE COVERAGE! And leave the advice to the professionals.

  6. adequately insured October 4, 2017 at 12:47 pm -

    License guy, please answer this question. If you are retired and obviously don’t need coverage for loss of wages and have medicare with a supplement and don’t need medical coverage what other coverage do you need from uninsured motorist? I also carry 250/500 B and collision and 300,000 liability.

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