Navigate the Risk of Uninsured Drivers

Car accident - Flickr

If you drive a car, you are sharing the road with uninsured drivers. Although it is against the law in 49 states and the District of Columbia to drive without insurance, approximately one out of eight U.S. drivers do not have auto insurance according to the Insurance Research Council (IRC). In several states, more than one in five drivers do not carry coverage.

Why should you care? In 2012, the most recent year for which statistics are available, uninsured motorist claims totaled $2.6 billion, a 75 percent increase from the previous decade, according to the IRC. Those costs, largely borne by insurance companies, are passed on to insured drivers in the form of higher premiums.

States have tried a variety of ways to get motorists to buy car insurance that have produced mixed results. Some states require drivers registering their cars to show proof of insurance. In many states, uninsured drivers face stiff fines, but some of the states that have such penalties on the books often fail to enforce them. Furthermore, researchers have found that states with stiffer penalties, which can range from a maximum of $200 for a first offense in California to up to $1,500 for a first offense in New York, do not necessarily have the lowest uninsured rates.

There is no “typical” uninsured driver according to The Fiscal Times. Some don’t have car insurance because they resent the requirement—“Live Free or Die” New Hampshire is the only state that does not mandate it. Others don’t have it, because they are undocumented immigrants who lack driver’s licenses, which are needed to get insurance in many states.

Most of the uninsured, however, don’t purchase car insurance because they can’t afford it. The number of uninsured drivers peaked at 29.9 million in 2009 during the Great Recession and then dropped to 29.7 million in 2012, the last year for which data are available. Car insurance rates have risen more slowly than other expenses in recent years, but insurance ranks below necessities such as food and housing for drivers struggling to make ends meet.

According to the Insurance Information Institute, a New York-based organization that tracks the insurance industry, overall expenditures for car insurance increased by 10 percent between 2010 and 2011, while food expenses increased 21 percent; housing costs increased 29 percent; public transportation costs increased 29 percent and health care costs increased 52 percent.

If you’re involved in a serious accident with an uninsured motorist, you could be at risk for substantial financial losses. For protection from losses arising from an accident with an uninsured motorist, consider purchasing uninsured motorist coverage. A handful of states require that this coverage be included in all auto insurance policies. Regardless of state requirements, you may already carry uninsured motorist coverage. So, check your policy or ask your insurance professional.

Specific options for uninsured motorist coverage vary by state and insurer. In general, there are three types of protection:

Uninsured Motorist (UM) Insurance—This is also known as Uninsured Motorist Bodily Injury (UMBI) insurance. This coverage will pay your and your passengers’ medical bills if you’re involved in an accident with an uninsured motorist who is at fault. In addition, UM insurance will reimburse you and your passengers for lost wages. UM coverage also kicks in if you are hit as a pedestrian by an uninsured driver, or if you’re the victim of a hit-and-run accident.

Uninsured Motorist Property Damage (UMPD) Coverage—While UM insurance covers injuries, it does not extend to damage to your car or property. For this, you need UMPD coverage. Be aware that UMPD may not always cover damaged property beyond your car, and this option may not be available from your insurer—it depends on what state you live in. In addition, UMPD may not cover hit-and-run accidents.

Underinsured Motorist (UIM) Protection—In some instances, an at-fault driver may have liability insurance, but the policy’s limits do not cover the full extent of damage to your vehicle. In such cases, UIM insurance will cover the shortfall.

Given that there are a sizable number of uninsured motorists on the road with you, it is worth taking the time to consider whether you have the right insurance coverage. A few minutes spent reviewing your coverage can provide you and your family with greater peace of mind.

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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti

(Photo: Car accident, Flickr)

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