Face it, most people don’t read each sentence in their auto insurance policy. Even if they did, they would not necessarily understand all of the terms and language contained in the policy. When you buy car insurance, you probably believe that you are purchasing protection only in the event that you cause an auto accident, and are responsible to pay damages. This indeed is the main purpose of purchasing such insurance.

However, when you buy auto insurance, you also buy uninsured and underinsured coverage at a very small additional premium. Under Illinois law (215 ILCS 5/143 a-2) any auto insurance company doing business in this must provide this additional coverage. The insurance company is entitled to charge an additional premium for the uninsured and underinsured coverage, but this is a relatively small charge for what can be very essential insurance.

Liability coverage protects us for our own negligence in causing an accident. If on the way home from work one evening, your attention is diverted and you drive into the back of a car stopped at a red light, you are responsible for the damage to the other person's car as well as any injuries caused to the occupants of that car. What happens, however, if you are stopped at a red light and someone else crashes into you from behind, causing property damage and personal injury, when that other person has no insurance? This is where uninsured automobile insurance comes into play.

According to how much coverage you have purchased - the minimal amount being $20,000 - you can file an uninsured claim for the damage to your car and for your personal injury. If, for example, you have a $20,000 policy and you sustained a serious injury caused by an uninsured driver, you can collect up to $20,000 from your own insurance company.

Underinsured motorist coverage comes into play when the person that causes your accident has less insurance coverage than the amount of damage that has been caused. For example, assume you are injured in an accident, your medical bills are $20,000, you have lost 2 months from work at another $5,000, and that the individual who caused your accident has only $20,000 of insurance. If you have insurance more than $20,000, e.g. a $50,000 or a $100,000 policy, you can file a claim for underinsured coverage with your own insurance company for the difference between the limits of the offending party's insurance and your own limits.

You cannot purchase uninsured or underinsured coverage in an amount greater than the amount of your liability coverage. Remember liability coverage is the principal basis for the insurance. So, if you maintain a State-mandated minimum policy of $20,000 in liability coverage, you cannot obtain more than $20,000 in coverage for uninsured or underinsured coverage.

Revisit Your Insurance Policy Limits

What many people don't understand, is that the difference in premium payment between a minimum $20,000 policy and a $50,000, $100,000 or higher policy is not all that significant, probably only a few dollars a month. You can then purchase uninsured or underinsured coverage up to that higher amount ($50,000 for liability and $50,000 for uninsured and underinsured coverage).

Sometimes a cost-conscious consumer maintains higher policy limits for liability than for uninsured or underinsured coverage. This could be a mistake since the price of uninsured and underinsured coverage up to your liability limits is nominal. A word to the wise - check with your insurance agent about the difference in cost between a $100,000 policy with similar uninsured and underinsured coverage, versus a $20,000 policy. You may be surprised by the small additional cost that will be well worth it should you be involved in a serious accident.

Contact Lipkin & Apter today for questions or to schedule a consultation.