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FAQ: What is Underinsured Motorist Coverage?

Minnesota Auto Insurance Policies: Underinsured Motorist Coverage

What is Underinsured Motorist Coverage?

An underinsured motorist is someone who operates a vehicle with liability insurance that is adequate under Minnesota state law. However, the limits of that insurance policy are not always high enough to cover all of the other party’s losses when an underinsured motorist is the cause of an accident. 

After a serious accident, expenses can quickly spiral out of control because of medical bills and lost wages. Since the legally required minimum liability coverage may fall short of these expenses, underinsured motorist coverage is important to have. 

Underinsured motorist coverage takes care of the remaining expenses that an at-fault driver’s policy would have paid for if he or she had adequate limits to cover them. An accident victim can still collect from the other party’s policy. 

For example, accident damages could amount to a figure like $50,000 when an at-fault driver’s policy limit is only $30,000. In that case, an underinsured motorist coverage could take care of the last $20,000.

Underinsured motorists coverage may save drivers money even if they do not get into an accident because this type of policy add-on can reduce insurance premiums. 

Determining if an At-Fault Driver is Underinsured

There are two main steps in determining whether an at-fault driver is underinsured. First, determine how much the at-fault driver owes in damages to the accident victims. These are some of the factors to consider:

  • Loss of income
  • Loss of potential future income
  • Pain and suffering
  • Medical bills
  • Future cost of care

The second step is to determine how much insurance the at-fault driver has available to pay the damages. The at-fault driver is considered underinsured when damages owed exceed the available motor insurance. 

Injured parties can also sue the underinsured driver directly. However, people who choose to only have minimum coverage typically do so because they cannot afford more comprehensive coverage. It is unlikely that they would be able to further compensate accident victims outside of their insurance. 

Ultimately, this means accident victims could just be pursuing a case that will only cost them more of their own time and money.

Underinsured vs. Uninsured Coverage

In accidents involving underinsured drivers, the at-fault party’s insurance policy is at least able to cover some of the damages before underinsured coverage is applied. Responsible car owners also need protection against drivers who are totally uninsured. Despite the risks, 13% of drivers in the United States are uninsured. 

It is illegal to drive without valid insurance in Minnesota. The consequence for this misdemeanor is a fine ranging from a minimum of $200 up to $1,000. Drivers without insurance may also face up to 90 days in county jail. 

With hefty fines and possible jail time, uninsured motorists are not likely to have the means to compensate their victims after an accident. This is where uninsured coverage comes in.

Uninsured motorist coverage is sometimes confused with personal injury protection, another Minnesota requirement that covers medical expenses, lost wages, and replacement services during recovery. Uninsured motorist coverage has a wider scope.

Typically, uninsured motorist coverage can compensate the insured victim for emotional distress, pain and suffering, lost wages and diminished future earnings, and medical bills. Unfortunately, uninsured motorist coverage does not cover vehicle damage.

What does Minnesota Law say About Underinsured Motorist Coverage?

Under Minnesota law, all motorists are required to have both underinsured and uninsured motorist coverage. The minimum for underinsured motorist coverage is $25,000 to address possible death or injury of one person involved in an accident.

Under the statute 65B.49, Subd 3a,  “the liability of the reparation obligor with respect to the residual liability coverage required by this clause shall become absolute whenever injury or damage occurs; such liability may not be canceled or annulled by any agreement between the reparation obligor and the insured after the occurrence of the injury or damage; no statement made by the insured or on the insured’s behalf and no violation of said policy shall defeat or void said policy.”

In other words, liability insurance cannot be cancelled even with an agreement between the insurance company and the insured party.

What is “Add-on” Coverage?

Underinsured motor coverage is treated as an add-on. Add-on coverage is additional coverage that drivers may purchase to provide better financial protection for their cars in case of loss or damage. They will generally need to pay an extra premium for this additional coverage. 

Also, if a driver increases the limits on any existing coverage, premiums will go up. However, these additions can give policyholders peace of mind knowing that they will be more prepared if a serious accident happens.

Sand Law Can Help You Understand Your Insurance

If you have been involved in a Minnesota automobile accident involving an underinsured driver, call the attorneys at Sand Law today. Sand Law’s personal injury attorneys are familiar with the complexities of various policies. Our detailed lawyers will carefully review your case to make sure all of your losses are accounted for. Initial consultations are free. Contact us online or at 651-291-7263.