Although motor liability insurance is a legal requirement in almost every one of the 50 states and District of Columbia that comprise the United States a significant number of drivers chose to uninsure or underinsure their vehicles. When an insured driver is not at fault in an accident it is usual for their insurance company to make a claim against the insurance of the at fault party. When the at fault party has no insurance or is underinsured the insurance company may not be able to recover the cost of the claim and the insured driver is left out of pocket. If the accident involves personal injury the insured may be left significantly out of pocket, and moreover may face significant expenditure for their own medical treatment.
In many states an Uninsured Motor Insurance clause has become a legal requirement to the extent that the clause is taken for granted on most insurance policies. The clause means that the insurance of the not at fault party will cover his costs for property and liability claims arising out of an accident with an insured driver. Underinsurance clauses which cover the difference between the limits of indemnity accepted by the insurance company of the underinsured driver and the extent of the claim by the not at fault driver are sometimes carried as standard within motor policies and sometimes bought as an extra.
When discussing uninsured motor cover, the advice of an insurance broker or agent is highly recommended. Motor insurance laws varies from state to state which means that the precise definition of what is covered within the uninsurance and underinsurance clauses can also vary from state to state. Different states also have different rules for the sale and rejection of underinsurance policies. In some states an opt out from the clause is only possible if the correct paperwork is completed.
Having explained what is meant by underinsurance cover the next task is to examine the pros and cons of such insurance. In an ideal world it is an unnecessary expense which a cost sensitive motorist might wish to avoid. In practice it protects the motorist from a potential gap in cover which could leave him with an expensive liability bill. In current circumstances it is particularly important to take out underinsurance cover. The combination of high motor premiums and little money in the economy means that many motorists are either underinsuring or not insuring their vehicles. In some states the extent of uninsurance, despite the practice being illegal, has reached 1 in 3 drivers. Furthermore uninsured or underinsured drives are likely to drive older vehicles and have a higher accident record than those who take out full insurance.
In recessionary times the underinsurance clause becomes an important part of the motor insurance policy. This coverage should not be neglected when accepting a motor policy renewal. The pro argument far outweighs the con aspect of this particular product.