Underinsured and At-Fault

Almost all states require some form of auto coverage insurance. This may include Bodily Injury Coverage, Personal Injury Protection, Property Damage Liability, Collision Coverage, and even Uninsured Motor Coverage. Depending on the state, the coverage level will vary greatly. For instance, you may only be required by to carry $25,000 in bodily injury coverage. While a relative residing across the country may be required to carry $50,000 in bodily injury coverage. And while mandated requirements are often used as guides by drivers when selecting their policies, these coverage levels are not always enough to cover the cost of an accident. So what happens if you are underinsured and at fault in an accident?

The course of action will vary greatly depending on whether you are in a state with no-fault laws or traditional tort insurance laws. In states with no-fault laws, your insurance company will pay your damages while the other party’s insurance company will be responsible for theirs so if you choose to carry low levels of coverage the amount you receive after an accident will be capped by the coverage you selected. In states where traditional tort insurance laws exist, fault is established and the party at fault is responsible for the damages. If the driver at fault is underinsured in a traditional tort state, both parties may be in trouble.

Following the accident, your insurance company will seek to settle all claims as soon as possible. Even if you carry the lowest possible coverage, your insurer is responsible for your legal representation. If the opposing party has injuries exceeding your coverage level, and has Underinsured or Uninsured Motor Coverage, he or she may be able to collect the difference from this policy. However, if they don’t have this extra protection net from their own insurer or the damages exceed the policy limits, the injured party may file a lawsuit against you where your personal assets are at risk.

In selecting an auto insurance policy, you might consider purchasing coverage above the minimum limits to protect your assets and livelihood. While a limit of $25,000 may seem high, the costs of healthcare continue to soar and just a one week stay at a hospital following an accident can easily exceed that amount.