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.
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.
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 “collision” deductible 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.