Uninsured/Underinsured Motorists Coverage
Domain 4 - Uninsured/Underinsured Motorists Coverage
This domain tests Part C. You need to know what “uninsured” and “underinsured” mean, who is an insured, what damages are payable, and how the coverage interacts with tortfeasor limits.
Part C insuring agreement
The insurer pays compensatory damages for bodily injury that an insured is legally entitled to recover from the owner or operator of an uninsured auto. UM does not pay property damage in the standard PAP; some states require UMPD by endorsement. The insured must establish fault and damages, usually through arbitration if liability is disputed.
An uninsured auto includes one with no liability policy, a policy that does not meet financial responsibility limits, a hit-and-run vehicle, or an insolvent insurer. Underinsured means the at-fault driver has liability limits that are insufficient to pay the insured’s damages; state rules differ on whether UIM pays the difference or pays up to the UIM limit.
Who is insured
- You and family members, while occupying any auto or as pedestrians.
- Others occupying your covered auto.
Common exclusions include workers’ compensation, use without permission, and an owned auto not insured under the policy.
Worked example
A client with UM limits of 50/100 is struck by a hit-and-run driver and incurs $40,000 in medical bills and lost wages. Because the hit-and-run vehicle is an uninsured auto and the client’s damages are $40,000, UM can pay up to the $50,000 per-person limit, subject to the policy’s terms. If the at-fault driver instead carried a 25/50 policy and the client’s damages were $80,000, UIM could pay the gap after the $25,000 bodily injury limit is exhausted, depending on state law. The reasoning: UM/UIM is fault-based, not no-fault, and the tortfeasor’s limits are part of the calculation.
Traps
- Thinking UM covers damage to the car; it covers bodily injury only under the standard PAP.
- Assuming UM is optional everywhere; many states mandate it.
- Missing the owned-but-uninsured exclusion.
- Failing to report a hit-and-run promptly, which can jeopardize the claim.
- Confusing UM with collision, which pays regardless of fault.