What is uninsured motorist coverage?

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Dear Driving for Dollars,
My friend was in a car accident that wasn’t his fault, and the other person didn’t have much insurance coverage. His car had a lot of damage, and he was banged up pretty badly.

He had uninsured motorist coverage on his car insurance policy, but it doesn’t look like all his bills will be paid. What exactly does this type of insurance cover?
— William

Dear William,
Drivers who don’t have enough car insurance are a serious problem in the U.S. According to a 2013 report by the Insurance Research Council, 14% of car accidents are the fault of uninsured motorists nationwide. At the state level, the percentage of drivers without car insurance ranges from 4% to 26%, depending on the state. As a result, it’s pretty important to have uninsured/underinsured coverage on your auto insurance policy in case of an accident that is the fault of one of these drivers.

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What probably happened with your friend was that he didn’t have enough coverage on his policy for uninsured and underinsured drivers. This portion of a car insurance policy typically provides coverage for the costs associated with the accident — for the car’s occupants and, in some cases, the car itself.

To determine how much uninsured or underinsured motorist coverage you need, consider your car’s worth, as well as the deductibles and overall limits of your medical insurance (and possibly anyone who will regularly be in the car with you).

You might also consider if you have access to disability insurance through your work to make up for lost wages if you can’t work. Once you look at all these factors, you can select an amount of coverage that would suit you in a serious accident. In many states, you can purchase coverage up to $1 million.

If you’re looking for car insurance, you can check your credit score free at myBankrate.

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