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Underinsured motorist coverage functions as a safeguard against getting into an accident with drivers that carry an inadequate amount of liability insurance. States require some level of liability insurance, but in some cases the amount required by law may not be enough to pay for the liability of an accident. For instance, if another driver crashes into your car and you are seriously injured, could rack up a hospital bill of $50,000. If the motorist that hit you only has $20,000 of liability coverage, you would only be able to get $20,000 from his insurance company. This is where underinsured motorist coverage steps in: if you had underinsured motorist coverage of at least $50,000, your own insurance company would pay for the extra damages that exceeded the other driver's liability coverage.
Underinsured motorist coverage is sometimes abbreviated as "UIM" by insurance companies and the coverage is often bundled with uninsured motorist coverage or "UM." Uninsured motorist coverage is similar to underinsured coverage in that it protects against damages caused to you by others; the difference is that uninsured motorist coverage protects against drivers that have no insurance at all rather than
Underinsured motorist coverage can save victims of auto accidents a lot of money since the minimum amount of liability coverage required by law is often much lower than the potential damage caused by an auto accident. The coverage may protect against damage to a vehicle as well as personal injury depending on the policy and extends to other people in your car at the time of the accident.
Underinsured and uninsured motorist coverage only protects against damage caused by auto accidents that are not your fault. If you are the cause of an accident you cannot use underinsured or uninsured coverage; instead your own liability coverage will pay for damages to the other driver and his or her underinsured coverage will pay for damages that exceed your liability coverage limit.
Certain types of car insurance, such as collision and comprehensive coverage, decrease in usefulness when the value of your vehicle declines. Underinsured motorist coverage is an important type of coverage to consider, even if you drive an old car that is not worth protecting with collision or comprehensive coverage, since it can cover medical expenses that result from an accident.