Uninsured and Underinsured Motorists Insurance Coverage and Umbrella Insurance

Uninsured and Underinsured Motorists Insurance Coverage and Umbrella Insurance

by | 52 Tax Tips and Weekly Financial Blog




Your safety is in your own hands. So, when out on the road, it is your duty to ensure your safety. Danny, a first-time car-buyer was conscious of his role in fortifying his own safety while out on the road. Many states have a minimum law that requires motorists prove financial responsibility when driving on the road. You either must purchase the minimum auto insurance or you must post a bond.

For example, as of 2019, the minimum Arizona insurance coverage provisions are: $15,000 bodily injury per person, $30,000 bodily injury per accident, and $10,000 property damage.

For 2020, Arizona minimum limits increased to $25,000 bodily injury per person, $50,000 bodily injury per accident, and $15,000 property damage.

The National Safety Council tells us:

  • The average vehicle on the road costs about $30,000 and the average hospital stay, because of an auto accident, runs about $60,000. This explains that the minimum insurance is not usually enough. So, be sure you purchase greater limits than just mentioned.
  • Additionally, in Arizona, 11% of all vehicles on the road do not have ANY auto insurance coverage.

There is a coverage known as Uninsured and Underinsured Motorist for Bodily Injury (UMBI). This insurance protects you if you are hit by someone with little or no insurance. Arizona does NOT offer uninsured and underinsured property damage. Your property damage (collision/comprehensive insurance) will take over if the person who hits you, does not have enough property coverage. This explains the need to make sure that your coverage is higher than the minimum. So, check with your state to see if you can buy Uninsured or Underinsured Property Damage (UMPD).

The uninsured and underinsured motorist coverage will protect you for medical purposes, if somebody hits you, sending you to the hospital or doctor. If you don’t purchase this type of coverage, YOUR insurance policy will have to pay your medical bills. If your insurance must pay your medical expenses, you might experience increased premiums, even if it wasn’t your fault. This is another reason to purchase the uninsured and underinsured coverage. The same problem can occur if your state allows purchase of (UMPD) and you choose not to buy it.

Another insurance policy to consider is Umbrella Insurance. Here, the umbrella policy will kick in, if your other insurance is not enough to cover the costs, coverages, medical and property damage that you are involved in. You might think of just buying minimum coverage, then buy high umbrella, but remember, insurance companies are on to this.

Insurance companies usually require that you buy higher insurance coverage before allowing you to buy umbrella policies. Umbrella Insurance Coverage is good for both accidents on the road or at home. If friends or family are injured or hurt at your home, office, or while in your vehicle, and you don’t have enough insurance to cover the damages, your Umbrella policy may protect you from filing bankruptcy or suffering major financial distress, from potential law suits even from family and friends that are hurt while on your property. Check with your insurance provider about Umbrella Insurance Coverage.

Here are some points to remember:

  • Minimum Arizona insurance is not enough to cover most accidents
  • Minimum Arizona insurance limits increased in 2020
  • Underinsured and uninsured motorist is for bodily injury only in Arizona, but other states offer property damage coverage, in addition.
  • Not buying this additional insurance could easily increase your premiums, even though the accident is not your fault
  • Always consider umbrella insurance as another form of protection from potential lawsuits

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Mr. Hockensmith has been a guest newscaster for national and local TV stations in Phoenix since 1995, broadcasting financial and tax topics to the general pubic. He has written tax and accounting articles for both national and local newspapers and professional journals. He has been a public speaker nationally and locally on tax, accounting, financial planning and economics since 1992. He was a Disaster Reservist at the Federal Emergency Management Agency, for many years after his military service. He served as a Colonel with the US Army, retiring from military service after 36 years in 2008. Early in his accounting career, he was a Accountant and Consultant with Arthur Andersen CPA’s and Ernst & Young CPA’s.

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