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What does "underinsured driver" mean?

We often hear of uninsured drivers, but many drivers do not realize how easily they can also be underinsured.

Each state has its own set of insurance rules and regulations, with mandated minimum liability limits. For example, the state of Washington has a minimum requirement of $25,000 per person bodily injury coverage, and $50,000 per accident.

Consider a scenario like this one. You are driving down the highway at a normal rate of speed when another vehicle cuts you off, forcing you off the road and into a tree. In an accident of this magnitude, you are likely to have significant bodily injury. Considering the costs of medical treatment, it is not unforeseen for the bills to add up to $100,000 or higher if you need surgery. However, the party who caused the accident only has an insurance policy with the minimum $25,000 per person bodily injury limit. This is where an uninsured/underinsured clause in your own insurance policy will apply. Your insurance company would create an underinsured motorist claim and pay all expenses the at-fault party's policy did not cover. Once the claim was completely settled and released, your insurance company would then subrogate against that individual to recoup losses due to his or her being underinsured.

A party who has been injured in a car accident by an underinsured driver should consult with an attorney prior to finalizing and closing out an insurance claim. He or she can offer guidance in making sure that all past, as well as any possible future expenses, are covered before the insurance company is released from liability. In addition, there may be further compensation gained depending on the circumstances.

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