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Uninsured Motorist Insurance Coverage and Accident Claim Guide

Updated on January 31, 2012
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Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache.

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There is a lot of confusion over uninsured motorist insurance coverage, laws, and what it covers. Insurance companies promise lower rates in the media. In some cases, the reduction in premium is from reduced coverage. Once you understand what uninsured motorist insurance covers, I know you will never accept substandard coverage again.

Insurance agents spend little time discussing uninsured motorist coverage because there is so little commission in it. The insurance agent cannot expend more than minimal resources on products that bring only pennies in revenue. Explaining uninsured motorist coverage is a money losing proposition for insurance agents.

In this article I will outline what uninsured motorist insurance coverage is, who it covers, and how to arm yourself with information when applying for auto insurance coverage. With facts in hand, you know how much coverage you need before the insurance agent starts talking.

Uninsured Motorist Defined

Most people think they know what the liability insurance coverage in their auto policy protects. Most are wrong.

Liability: The best way to think of liability insurance is that it protects everyone but you. If you are in an accident, the liability coverage on your auto policy will pay others for injury and death. You, your family, and friends never collect a penny if they are injured from the liability portion of your auto insurance.

Uninsured Motorist: Uninsured motorist protects you, your family, and friends if they are injured or killed in an accident in your vehicle.

The Biggest Mistake on Auto Insurance Policies

Think about the definitions above for a few moments. Do you see a problem? A really big problem? No. Let me show you how it works in real life.

Too many people have $500,000 - $1,000,000 in liability coverage and the minimum uninsured motorist coverage; perhaps $25,000 - $50,000.

In an accident, the other person, even if at fault and uninsured, is covered by your liability limits. Your spouse, children, other family members, and friends, are coved by the uninsured motorist limits.

Let me paint the picture clearer. A drunk driver runs a red light, broadsides your vehicle, permanently injuring or killing your spouse or child. The drunk is also killed. The liability limits on your auto policy will cover the drunk driver. Wrongful death and no-fault laws in most states mean his family will get up to the wrongful death limits, $350,000 or thereabouts. You get $25,000, the uninsured motorist coverage on your auto policy. There might be a little left over after funeral costs.

Makes your stomach turn, doesn’t it? When you view uninsured motorist for what it really is, it becomes as important as the liability coverage on your auto policy.

Wrongful Death

You can be liable for wrongful death even if you are not at fault. Wrongful death varies from state to state. $350,000 for adults and $500,000 for children are common amounts.

I recommend at least $1 million in liability and uninsured/underinsured motorist liability coverage. And I am not trying to sell you insurance. I am an accountant with 27 years experience helping people develop and execute holistic financial plans. Protecting assets is rule number one.

Let me paint another picture. Cold weather settles in. You are sober and driving the speed limit or less. You hit a patch of black ice and slide into a child on the side of the road. No one is at fault. It is an unfortunate accident. If your state’s wrongful death amount for children is $500,000, your insurance will pay out that amount or up to the policy limits. If your policy liability is only $350,000, you are personally liable for $150,000.

The above example leads me to believe $1 million in liability coverage is a minimum for most people. And if you cover everyone else for a million, what about you and your family? Are they worth a million? More? Better make that $1 million uninsured/underinsured, too.

Cost of Uninsured Motorist

Uninsured motorist liability insurance is inexpensive compared to other parts of an auto policy. Cost will depend on where you live. Except for high cost areas of the country, you will pay $20 and under per year in most cases. Twenty dollars to protect your family for the same amount you protect everyone else.

The choice is simple. Liability and uninsured/underinsured motorist covered should be at the same level.

Auto Insurance Policy


A large number of people are getting auto insurance online. Promises of cheaper insurance or name your own price insurance carries risk. When applying for auto insurance review two facts:

  1. Company Rating: Make sure the insurance company has an adequate rating. If the insurance company is unable to pay a claim, what good is the insurance?

  2. Shortcuts: I have seen several examples of uninsured motorist reductions as the source of the savings. This is not really saving anything. It only puts your family at risk. When getting a quote, make sure the uninsured/underinsured motorist coverage is what you require. When the policy is issued, recheck the policy limits. After an accident is a poor time to check your coverage.

Now you have the facts necessary to acquire the best auto insurance policy for you. Uninsured motorist coverage and accident claims are no longer a mystery.


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