Uninsured or Under Insured: What Is the Difference?
Every state has financial responsibility laws that pertain to those who drive their vehicles on public roads. If these drivers would like to exercise the privilege of driving their vehicles on the states’ public roads, they must first present proof that they have taken measures to be able to pay for the damages that result if they cause an accident. Some states require that every driver purchase auto insurance for this purpose. Whether it is required or not, auto insurance tends to be the least expensive option that states give their drivers for maintaining financial responsibility.
The Difference between Uninsured and Under Insured
Even though the states have the requirement that people purchase auto insurance in the required amounts, some people will remain uninsured or under insured. Those who are uninsured are people driving on the streets and highways without having purchased an auto insurance policy. The under insured driver is someone who purchased insurance coverage in at least the amounts the state has mandated, but this coverage is not enough to pay all of the third party bills.
The States’ Required Minimums
Whether the state requires that drivers purchase auto insurance or not, they have determined the type of auto insurance that insurance companies must sell as well as the minimum amount of coverage that people must have. For example, in California, drivers must purchase bodily injury liability and property damage liability insurance. They must purchase bodily injury liability in the amount of $15,000 to cover one person’s bills. They must also have $30,000 for at least two people who were injured. Property damage liability must be in the amount of $5,000.
When the Bills Exceed the Minimums
If a driver causes a collision and one person’s medical expenses exceed $15,000, this particular driver is said to be under insured. In this case, the injured can take the under insured driver to court to sue for payment of the remainder of the bills if the parties are in a tort state.
Similarly, more than two people can be injured during a collision. If two people file claims for payment of their medical expenses, the insurance company is required to pay $30,000 for these claimants’ bills. A third injured person would not be able to file a claim if the insurance company paid $30,000 to the first two injured parties. This would be another instance when the under insured driver may be the subject of a lawsuit.
A collision can easily result in property damages that surpass $5,000. In that case, everyone who was not able to file a claim will be able to file a lawsuit against the uninsured or under insured driver who caused the crash.
Some states require that drivers also purchase coverage against the possibility of being hit by an uninsured or under insured driver. When the under insured driver’s insurance company meets its requirements and stops paying the medical bills, the injured’s under insured coverage takes over. If the driver was uninsured or a hit-and-run driver, the uninsured coverage pays the bills from the beginning.
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