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The basics of underinsured and uninsured motorist coverage

In many auto collisions, the insurance company of the at-fault driver will compensate the motorist who had no responsibility for the accident. But there are innocent drivers who are not so fortunate. They will suffer a collision only to find out the other driver does not possess insurance to cover their injuries or vehicle damage.

Additionally, some people become the victim of a hit and run driver, which also deprives them of any coverage from the other driver. In these situations, it may help to have an uninsured/underinsured motorist coverage policy.

How uninsured coverage works

As Nerdwallet explains, an uninsured coverage policy pays for damages caused by uninsured drivers. Uninsured coverage will generally divide into medical and property damage costs. Depending on the policy, a driver may purchase one or the other, or both kinds of policies together.

How underinsured coverage works

A policy to cover damage from an underinsured driver functions in a similar way. A driver who causes an accident may have insurance, just not enough to cover all the medical costs for injuries or the full repair costs for the other vehicle. An underinsured policy allows the policy holder to cover gaps in the other driver’s coverage.

Coverage pays up to policy limits

Like any insurance policy, uninsured/underinsured coverage pays out to the limits of the policy. The good news is that a lot of uninsured coverage is not very expensive. Still, drivers with more liability insurance may want to seek a more expensive coverage policy so they can cover a costly vehicle.

Policy payments may not be automatic

Having an uninsured/underinsured policy may provide peace of mind, but no driver should assume that their policy will pay out automatically after an accident. Policy holders generally have to fulfill certain requirements, including showing the insurance company that they did all they could to collect from the uninsured driver. This may result in protracted dealings with an insurer to secure coverage.

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