Most of us renew our auto insurance annually without much of a review. We're going to suggest that at your next renewal, or before, you have a conversation with your agent about the part of your coverage that few people think about or understand. It's the coverage known as Uninsured and Underinsured, or UM.
Most states have adopted no-fault auto insurance. The basic premise of no-fault is that each party in an accident collects benefits from his/her own insurance policy regardless of who was at fault. This would include medical bills, lost wages and so forth. However, no-fault does not cover damages for pain and suffering. If you are involved in an accident where the other party was at fault, you have the right to collect damages to compensate you for your pain and suffering. The amount of these damages can be determined in a settlement negotiation or via a law suit if the settlement doesn't produce a satisfactory result.
This is where the UM part of your policy comes in. Let's say that the party at fault carries minimum auto insurance or no insurance at all, which happens more than you might think. Let's further assume that your injuries resulted in a great deal of pain and suffering. You first claim against the other party's insurance policy for pain and suffering damages. If their coverage is minimal, you can sue them for additional damages. But if that party has limited assets, your lawsuit could be a Pyrrhic victory. However, there is another option. After you exhaust the insurance coverage of the other party, you can claim damages for pain and suffering against your own policy, under the UU part of your policy.
Hence, it's important to know how much coverage you have for UU. You can only collect pain and suffering damages from your policy up to the UU limits you have selected. And most policies have minimum UU coverage. A higher amount of UU coverage might be advisable. A conversation with your insurance agent is in order.