Define an Underinsured Coverage Auto Policy
Underinsured auto coverage protects an individual when he is involved in an accident with another driver. It prevents a driver from being financially responsible for damages or medical bills not covered by another person's auto insurance.
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Definition
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Underinsured coverage is purchased with an auto insurance policy to protect an individual if she is in an accident with a person who does not have adequate coverage.
Purpose
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Most states have low limits on the amount of insurance an individual must carry for auto insurance. This amount may prove to be too little to cover medical bills and property damage in an accident. In that case, one's own underinsured coverage would pay the difference.
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Coverage
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The coverage is divided into two parts, bodily injury coverage and property damage coverage. The driver and all passengers would be covered under the policy.
Cost
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Underinsured coverage is inexpensive in comparison to liability and comprehensive coverage. On average, the cost is about 10 percent of the entire insurance premium.
Fact
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According to the Insurance Research Council as of January 2009, one in every six drivers on the road has insufficient auto coverage or no coverage at all.
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