Underinsured motorist insurance is very much similar to uninsured motorist insurance. The basic difference between the two types of insurance is that for underinsured motorist coverage, you will be protected from financial losses in case of an accident caused by an underinsured driver. For example, the driver at fault may have car insurance that covers damages and injuries caused by him but the limit is set to the minimum. If the injuries you suffer and the damages inflicted on property exceed the limit of his insurance, then you would have to shoulder the excess costs. Now that would really blow – much like rubbing salt on a wound.
To avoid such an occurrence, you can opt to take out underinsured motorist insurance to cover all costs that exceed the other driver’s insurance limit. In some states, underinsured motorist insurance is a requirement. It is not the always the case, however. If you are not sure about your state’s requirements, your insurance company can give you that information.
So do you really need underinsured motorist insurance? The answer to question is really up to you and what kinds of car insurance coverage you already have. In essence, underinsured motorist insurance would cover your costs for medical bills, loss of wages, pain and suffering, and other injuries which may not be related to finances. Again, if you live in a state which requires insurance companies to offer underinsured motorist insurance, you may not have much choice in the matter. Although you probably have the option of rejecting it, you have to do so in writing. If you have total freedom of choice – that is, your state does not mandate underinsured motorist insurance – you have to take all relevant factors into consideration.
What you can do is to list down all your other insurance policies and what they cover. You may have health insurance, medical payments coverage, and personal injury protection. Identify what types of expenses they cover and how much your limit for each coverage is. Then list down the details for your potential underinsured motorist insurance policy. If there are items which are not covered by the other policies and are covered by the underinsured motorist policy, then it may be a good idea to purchase the latter. It would also be a good idea to compare the premiums for all your insurance policies to determine whether or not the underinsured motorist insurance policy would be worth the additional cost. In most cases, however, this type of insurance is not very expensive.