What it means
Most accident claims depend on the at-fault driver's liability insurance paying out. If that driver has no policy, or flees the scene in a hit-and-run, there may be nobody able to pay.
UM coverage gives you a route to compensation from your own insurer instead. The cover usually has a limit stated in the policy, often split into a per-person amount and a per-accident amount.
Bodily injury is the main benefit, and covers medical costs, lost income and pain and suffering up to the limit. Property damage cover for the vehicle is available in some states, usually with a deductible, which is the amount the policyholder pays first.
A close relative is underinsured motorist coverage, which applies when the other driver has insurance but not enough to cover your losses. Many policies combine the two into one benefit.
The rules about how the other driver's payment is deducted from your limit differ from state to state. For businesses, UM matters because employees drive on company business and company vehicles are at risk too.
Fleet and commercial auto policies usually include or offer UM cover, and a small premium can protect against a very large uncovered loss. Employers should also check whether workers' compensation interacts with the claim when an injury happens during work.
UM coverage will not pay for harm that you cause to someone else, which is the job of liability cover. It also generally does not cover you if you were mainly at fault, because the benefit depends on the other driver being legally responsible.
Reading the limits and exclusions before an accident is far cheaper than discovering them afterwards. Claims under UM follow a process that differs from a normal accident claim.
The injured person must usually prove that the other driver was at fault and uninsured, report a hit-and-run to the police promptly, and cooperate with the insurer's investigation. Because the claim is against your own insurer, it may dispute the value of the claim in the same way a liability insurer would.
In practice
Real-world examples.
Example
A sales manager is rear-ended at traffic lights by a driver whose policy lapsed. His own UM cover pays his hospital bills and part of his lost income, up to the limit on his policy.
Example
A courier van is hit by a car that drives off and is never found. The company's commercial auto policy includes UM property damage, and the insurer repairs the van after a $500 deductible.
Example
A teacher is injured by a driver carrying only the minimum legal liability limit of $25,000, which does not cover her costs. Her underinsured motorist cover, part of the same endorsement, pays the difference up to her own limit.
Formula
Calculation
UM payout = lesser of (your covered losses, your UM limit), less any deductible that applies
Suppose a delivery driver is injured by an uninsured motorist and has covered losses of $38,000 in medical bills and lost income. The policy's bodily injury UM limit is $25,000 per person. The payout is the lesser of 38,000 and 25,000, which is $25,000, and the remaining 38,000 - 25,000 = $13,000 is not paid by UM. That shortfall shows why choosing a higher limit can be worth the extra premium.Case study
Seen in the real world.
Pinecrest Courier Services is an illustrative, fictional delivery company with a fleet of twelve vans. To save about $1,800 a year in premiums, its owner declined UM cover when renewing the commercial auto policy.
Months later, one of its drivers was injured by an uninsured motorist and faced medical costs and lost wages far above what workers' compensation covered. The at-fault driver had no assets, and the company had no UM benefit to fall back on.
The owner added UM and underinsured cover at the next renewal and raised the limits. The illustrative lesson is that the premium for UM is small compared with the loss it protects against, and the cheapest policy is not always the cheapest outcome. It also began sending drivers a one-page note explaining what to do after an accident, including reporting the incident to the police and taking photographs of the scene.
Watch out
Common mistakes.
- Assuming that being insured protects you from uninsured drivers, when only UM or underinsured cover responds when the other driver cannot pay.
- Choosing the lowest UM limit to save premium, when a serious injury can easily exceed it.
- Thinking UM pays if you cause the accident, when it applies only when another driver is legally responsible.
Questions
People also ask.
Is UM compulsory?
It depends on the state, because some require drivers to carry it, some require insurers to offer it and allow a written refusal, and some do neither.
Does UM cover my passengers?
Usually yes for people in your vehicle, but the details depend on the policy wording and state law.
What is the difference between UM and UIM?
UM applies when the other driver has no insurance at all, while UIM applies when the other driver has insurance that is too low to cover your losses.
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