Here’s the scene: one of your workers has been hit while driving on the job. What’s worse, the other driver either doesn’t carry enough insurance coverage—or perhaps even any coverage at all. You’re wondering: where to from here?

What is Uninsured and Underinsured Motorist Coverage?

That’s where your own insurance comes in—specifically, the Uninsured Motorist and Underinsured Motorist Coverage additional coverages types added to your commercial automobile policy. Let’s look at the differences between these two types of coverage:

• Uninsured Motorist Coverage covers damage to your vehicle by a driver who does not have an auto insurance policy. However, it almost never covers hit-and-run accidents and is not available in all states. Keep in mind that Uninsured Motorist Coverage is usually related only to bodily injury.
• Underinsured Motorist Coverage provides protection should the at-fault driver’s coverage limits fall short of covering your accident-related expenses. This often happens when the other driver has purchased the minimum coverage required by law—if your employee receives major injuries, this likely won’t cover all medical expenses. However, if your own policy includes Underinsured Motorist Coverage, you can bridge the gap. In addition to paying for medical care, it may also apply to loss of income along with pain and suffering.

There are two main parts that make up Uninsured and Underinsured Motorist Coverage:

• Bodily injury coverage, which pertains to medical bills, lost wages, pain and suffering, funeral expenses, disfigurement, and permanent or partial disability.
• Property damage coverage, which covers the cost of repairs, rental cars, damage to personal items in the vehicle, and total vehicle loss.

Example:

Your employee is making deliveries in the company car when she is rear-ended by an uninsured driver, causing $10,000 in medical payments and $15,000 in property damage. If you carry uninsured motorist coverage, you are protected from both bodily injury and property damage claims.

However, if you do not carry this coverage and the other driver indeed has no insurance, you may suffer damage to your insurance record since your company is on the hook for associated costs. Additionally, your premiums might rise as a result.

Why do I need Uninsured and Underinsured Motorist Coverage?

The answer to this question may be as simple as the fact that your state requires it. The following states mandate Uninsured Motorist Insurance:

• Connecticut
• District of Columbia
• Illinois
• Kansas
• Maine
• Maryland
• Massachusetts
• Minnesota
• Missouri
• Nebraska
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Oregon
• South Carolina
• South Dakota
• Vermont
• Virginia
• West Virginia
• Wisconsin

These states require Underinsured Motorist Coverage:

• Connecticut
• Maine
• Maryland
• Massachusetts
• Minnesota
• Nebraska
• New Jersey
• North Carolina
• North Dakota
• Oregon
• South Dakota
• Vermont
• Virginia
• Wisconsin

Even if you follow the law when it comes to an auto policy, there are many out there who don’t. According to Nationwide, an estimated one in eight drivers is uninsured. That’s where Uninsured and Underinsured Motorist Coverage comes in.

Example:

You own a California business and one of your employees is running an errand using a company car. An uninsured driver hits him, totaling the car and causing injuries. When you file a claim with your insurance firm, you risk increasing your premiums and damaging your own record—which is still preferable to taking responsibility for the costs yourself.

If you or your employee is hit by an underinsured motorist, keep in mind that that driver might simply carry the state minimum, known as 15/30/5. In other words, they need at least $15,000 per person and $30,000 per accident for injuries. Finally, they need at least another $5,000 for property damage. Unfortunately, this simply may not be enough—but if you have Underinsured Motorist Coverage, you can cover the rest.

In 2017, the Insurance Research Council found that the number of U.S. drivers without insurance is on the rise, with 13 percent lacking coverage as opposed to 2010’s record low of 12.3 percent. Every time you or one of your employees get on the road, you’re gambling on whether you will run into one of these people.

If your business is located in Florida, Mississippi, or New Mexico, you’re running the greatest risk of getting hit by an uninsured or underinsured driver. In these states, 20-30% of drivers are uninsured.

You can’t guarantee that you won’t encounter an uninsured or underinsured motorist on the road, or that you or an employee of yours won’t get hit by them. However, you can reduce that risk by purchasing coverage to ensure you’re protected in an unfortunate event.

The 411 on Motorist Bodily Injury and Property Damage Liability Coverage

These are the two major components of both Uninsured and Underinsured Motorist Coverage. Bodily injury insurance coverage applies if you are hurt by an uninsured or underinsured driver, and it can be used toward medical bills, pain and suffering, and other costs. There is no associated deductible. Twenty-two states plus the District of Columbia require this coverage:

• Connecticut
• District of Columbia
• Illinois
• Kansas
• Maine
• Maryland
• Massachusetts
• Minnesota
• Missouri
• Nebraska
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Oregon
• Rhode Island*
• South Carolina
• South Dakota
• Vermont
• Virginia
• West Virginia
• Wisconsin

*Required only if you purchase higher liability limits

Uninsured and underinsured property damage coverage is akin to collision coverage in that it protects your vehicle in case of physical damage in a crash. However, it differs from collision in that insurance companies tend to see collision insurance claims as at-fault accidents, increasing your premium. However, uninsured motorist property damage and underinsured motorist property damage is seen as resulting from a not-at-fault accident. This coverage does have a deductible, but it’s likely that your liability insurer will reimburse you for it, instead of billing the at-fault driver. Property damage liability insurance coverage is required in the following states as well as the District of Columbia:

• District of Columbia
• Maryland
• New Jersey
• North Carolina
• South Carolina
• Vermont
• Virginia
• West Virginia

You should also know the difference between stacked and unstacked insurance. Stacking your coverage means that your cost goes up depending on the number of vehicles you are insuring.

Example:

You have four company vehicles each insured with $15,000 worth of uninsured bodily injury coverage. Should one of those vehicles be hit by an uninsured driver, you’d be able to apply the entire amount—$60,000—in coverage.

However, should you choose to stack your coverage, remember that your premiums will rise as a result. Stacked insurance may also not be available in your state, so be sure to check with your specific company.

Is Uninsured Motorist Coverage and Underinsured Motorist Coverage worth the cost?

You may be surprised at how reasonably this coverage is priced. While everyone’s individual mileage may vary, it’s been estimated that Uninsured and Underinsured Motorist Coverage costs about half of liability insurance’s price tag.

Think about it this way: with hospital bills stemming from auto accidents hitting an average of $60,000, you risk losing tens of thousands of dollars if you don’t carry Uninsured and Underinsured Motorist Coverage. You should also consider the common insurance wisdom that—after subtracting liabilities from assets—you should have enough remaining to cover your net worth.

Example:

You or your employee are in an accident with an underinsured driver whose bodily injury limits are $30,000. If the hospital bill exceeds that amount and you don’t carry coverage to bridge the gap, you’re on the hook for it.

Buying Uninsured and Underinsured Motorist Coverage can help prevent you from paying tens of thousands of dollars out of pocket.

As described above, stacking your coverage can help you get the most out of it. Stacking works in two different ways:

• If you have multiple vehicles insured under the same policy, it’s possible that you can collect your policy limit on them all.
• If you hold multiple policies and are the primary driver on them all, you may be eligible to collect on all of them up to the full bodily-injury cost.

However, remember that stacking your coverage will cost more than the unstacked option. Weigh your options before making the choice.

Final Word

If you run a small business and you or your employees drive for a living, Uninsured and Underinsured Motorist Coverage may provide you with the comprehensive insurance you need to protect you from paying substantial out-of-pocket expenses in the event of an accident. With an estimated one-eighth of U.S. drivers failing to carry auto insurance coverage, this comprehensive coverage is a savvy way to bridge the gap between the limits of your own coverage and the potentially devastating bills stemming from an accident with an uninsured or underinsured motorist. However, since the availability and minimum limits of coverage differ from state to state, it is essential that you do your homework before signing on the dotted line.