how underinsured motorist endorsements work
drivers purchase auto insurance for several reasons such as the risk of their car becoming damaged in an accident the risk of damaging another person s car or the risk of killing or injuring another person but one risk that is sometimes neglected by drivers is the possibility that they might be injured or have their car damaged by another driver who has failed to take out adequate auto insurance in that instance the policyholder might have a legitimate claim against the at fault driver but be unable to collect damages after all if the at fault driver does not have the necessary assets or insurance they might simply declare bankruptcy leaving little or nothing for the victim to collect to protect against this risk drivers can purchase underinsured motorist endorsements as part of their auto insurance policy this supplemental insurance policy covers property damages bodily injury to the policyholder as well as injuries to insured family members or passengers if a claim needs to be filed the endorsement can cover the difference between the coverage paid by the at fault driver s insurance and the full amount owing in a scenario where the at fault driver has no insurance and no personal assets to pay for the claim the endorsement would therefore cover the entire amount of the claim up to the maximum coverage level specified in the policy in many states drivers are required by law to purchase underinsured motorist endorsements although it is sometimes referred to using different terms in some cases this coverage only applies when the at fault driver has no auto insurance at all as opposed to covering the gap between their coverage and the claim amount although the precise insurance requirements vary from state to state they typically last from six to twelve months and are renewable thereafter as with most insurance policies the insurance premiums associated with the coverage will vary based on factors such as the policyholder s age years of driving history and history of claims real world example of an underinsured motorist endorsementto illustrate consider a situation where driver a gets into an accident with driver b the at fault driver in this scenario is driver a and the full damages associated with the incident amount to 175 000 unfortunately driver a only has 100 000 of coverage but thankfully driver b has an underinsured motorist endorsement for this reason driver a s insurance pays 100 000 out of the 175 000 total whereas driver b s insurance pays the remaining balance of 75 000 because driver b purchased an underinsured motorist endorsement he is able to receive the full 175 000 and be made whole 