Underinsurance is the single most important automobile insurance coverage that you can get. To understand underinsurance, you need to understand liability insurance. This is the insurance that the other person, the one who caused the wreck, has. It’s what will be used to pay your medical bills, lost wages, pain and suffering, and emotional distress. But if they don’t have enough coverage—for instance, if they only have the state minimums—then you may face a shortfall.
For example, if the other person has a liability policy with a limit of $25,000, but your medical expenses exceed that amount, you’ll need additional funds. This is where underinsurance comes in. Underinsurance is your own insurance coverage that kicks in and pays above what the other person’s liability coverage can cover.
So, if you have underinsurance coverage of $100,000 and the other person’s liability policy only covers $25,000, you could potentially receive a total of $125,000 in coverage. Underinsurance provides additional protection in situations where the at-fault party’s insurance isn’t sufficient to cover all your expenses.
