What is Uninsured/Underinsured Coverage?

Throughout most of Canada and the US, liability insurance for autos is mandatory. In many areas, uninsured/underinsured motorist coverage is also required. These coverage types are separate, but also share some similarities.

First, let’s discuss liability insurance because the concept of liability is at the heart of both coverage types. Auto insurance policies have 2 primary types of liability coverage.

Bodily injury liability:

• This coverage can help pay for the injuries caused to others in an auto accident. Other related expenses might include pain and suffering or lost wages.

Property damage liability:

• This coverage can help pay for damage to the property of others. Often in an auto accident, this damage is caused to other vehicles. But damaged property can also include signs, fences, buildings, or anything else we might accidentally bump into with our vehicles.

In both cases, your policy defines the limits of coverage for each type of liability. Some policies use a combined limit rather than separate limits for each coverage type.

In a perfect world, the other party involved in an accident carries enough coverage to pay for their liability to you if you are injured or if they have damaged your vehicle in an accident. But the world is not always perfect and sometimes others cause more damage than their policy will cover. This is where uninsured/underinsured motorist coverage comes into play.

With uninsured/underinsured (UM or UIM) motorist coverage, your own policy can cover the shortfall if the other party does not have insurance or if they do not have enough insurance to cover their liability. For example, in some areas, the minimum bodily injury liability limit is as low as $15,000 and the minimum property damage limit is only $5,000. You do not need to be a doctor or an auto body specialist to know those limits can easily be exceeded in an accident. With UM coverage, your own policy is triggered if the other party does not have enough coverage to cover your financial loss.

Depending on location, some insured offer UM for both bodily injury liability and property damage liability, while others limit coverage to just bodily injury liability. It is also a common requirement that your UM coverage match the liability limits you have chosen for yourself.

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