Uninsured/Underinsured Motorist Coverage Critical During a Recession

By Robert Lewis, InsWeb.com

You're a safe, responsible driver. You always pay your auto insurance premiums on time and review your coverage levels every six months. So when a pickup truck runs a stop sign and smashes into your driver-side fender, your auto insurance policy will cover the damage, right?

If your policy doesn't include uninsured/underinsured motorist coverage, don't count on it.

As unemployment numbers rise, cash-strapped drivers are canceling or reducing auto insurance coverage in a desperate attempt to save money. And they're putting all motorists at risk, including insured drivers.

If you're involved in an accident with an uninsured or underinsured motorist and don't have uninsured/underinsured motorist coverage, you're probably on your own to settle the damage-even if you're not at fault.

Rebecca McCormick, a travel journalist/photographer from Arkansas, learned this lesson the hard way.

In 2000, McCormick and her young son were traveling outside of Tuscaloosa, Ala., when they were run off the road by an 18-wheeler. Her vehicle spiraled out of control, flipping end over end four times before landing upside down in the median.

Onlookers feared the worst. "The witnesses flipped a coin to see who would inspect the car, since they all assumed we were dead," McCormick explained. With all the attention focused on the overturned vehicle, the 18-wheeler, which had initially pulled off the road, quietly drove off.

Though McCormick and her son made it out of the crash virtually unharmed, the financial aftermath was devastating. "I racked up a $5,000 emergency room bill and totaled the car. Because I didn't have uninsured motorist coverage, I lost everything," she said. "I spent the next year without transportation and had to declare bankruptcy, which is still an ever-present reminder on my credit record."

Uninsured/underinsured motorist coverage covers damage from an accident involving an uninsured or underinsured driver and protects pedestrians injured by hit-and-run drivers. It's not required in most states but is relatively inexpensive-just a few dollars per month on average. Unfortunately, many drivers haven't grasped the importance of this coverage-at least not yet.

"Most people don't think about the uninsured or underinsured motorist coverage portion of their auto insurance policy until they are the victim of a hit and run accident, or are involved in a crash with a driver who either does not have auto insurance or has very minimal insurance," explained Jeanne M. Salvatore, senior vice president and consumer spokesperson for the Insurance Information Institute.

The Insurance Research Council (IRC) reports that one in seven drivers is currently without auto insurance, and sees a "strong correlation" between the unemployment rate and number of uninsured drivers. In fact, for every one percent increase in national unemployment, the level of uninsured drivers rises by three-quarters of a percent.

If economic struggles persist, the IRC estimates one in six drivers will be uninsured by 2010-an all-time high.