I want to share information about Underinsured Motorist (UIM) coverage. Recently, a client requested Underinsured Motorist Property Damage (UIMPD) coverage to be added to his auto policy, which is not available in the state of Indiana. Only UIMBI (Underinsured Motorist Bodily Injury) coverage is available in this state.
WHAT IS UNDERINSURED MOTORIST COVERAGE
Underinsured motorist coverage protects a person who is involved in an accident with someone who does not have sufficient insurance of their own. Ideally in an accident, the insurance of the at-fault person is supposed to compensate the other party. If the at-fault party has minimum or low limits, then it may be impossible to make the other party whole, without pursuing litigation.
HOW UNDERINSURED MOTORIST COVERAGE WORKS
If there is UIM coverage, then the innocent party’s insurance company will step in and resolve the matter up to the UIM limits on their policy, then subrogate the at fault party for the limits of their policy. For example, a client has a bodily injury claim worth 100k and the other at-fault party only has 50k in limits. The client’s carrier would step in and resolve the claim for 100k, then subrogate the other carrier and recover their 50k limit. If the at-fault party does not have any valuable assets, then the matter will likely end there.
UNDERINSURED MOTORIST COVERAGE VS. UNINSURED COVERAGE
Underinsured coverage is different from uninsured coverage, which covers cases in which the at-fault driver has no insurance at all, though the two types may be bundled together. A handful of states require underinsured motorist coverage, while more require uninsured motorist coverage. Indiana does not offer underinsured motorists’ coverage for property damage. UIMBI (Underinsured motorist bodily injury) coverage would be able to help with bodily injury, but if the policy of the at-fault person is unable to pay for the property damage caused to the vehicle, then the client may be in a bind.
HOW TO PREPARE FOR THE SITUATION
To be prepared for situations like this one, the only option in Indiana is to include collision in the policy. Collision is subject to a deductible, but it would step in to help cover property damage losses that surpass the policy limits of the person at fault. Without collision coverage, the client is left to either personally accept the additional loss or pursue litigation on their own.
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Disclaimer: These monthly blogs contain general information and may be subject to change. Policy language may vary by insurance carrier, so please refer to the specific policy in question. The Claims Advocate does not make any representations that coverage does or does not exist for any claim or loss and in no way guarantees coverage for claims.