What Is Economic Only Uninsured Motorist Coverage?

Uninsured motorist coverage serves as a crucial safeguard within an auto insurance policy, designed to protect individuals from the financial repercussions of accidents caused by drivers who lack adequate insurance. Despite legal requirements for liability insurance in most places, a significant number of motorists operate without any coverage or with insufficient amounts. This coverage helps ensure that policyholders and their passengers can receive compensation for damages when an at-fault driver cannot pay for the harm they inflict. Different forms of this protection exist, each offering varying levels of security depending on the specifics of the policy.

Understanding Uninsured Motorist Coverage

Standard uninsured motorist (UM) coverage is a component of an automobile insurance policy that provides a financial safety net for policyholders. Its primary purpose is to cover injuries and, in some cases, property damage sustained by the policyholder and their passengers when involved in an accident with an at-fault driver who does not carry liability insurance.

UM coverage compensates for a range of losses following such an incident. This typically includes medical expenses, such as doctor visits, hospital stays, and rehabilitation costs, ensuring that physical recovery is not financially burdensome. Additionally, it commonly covers lost wages if injuries prevent the policyholder or their passengers from working. Many standard UM policies also account for non-economic damages, such as compensation for physical pain and emotional suffering resulting from the accident.

What Defines Economic Only Coverage

Economic only uninsured motorist coverage addresses only quantifiable financial losses following an accident with an uninsured driver. “Economic damages” are losses that have a clear, verifiable monetary value. These include past and future medical expenses, such as hospital bills, doctor visits, prescription costs, and physical therapy. Other economic damages encompass lost wages or income due to the inability to work, property damage costs, and funeral expenses. These are losses that can be substantiated with invoices, receipts, or wage documentation.

This form of coverage distinctly contrasts with policies that also cover “non-economic damages.” Non-economic damages are subjective losses that do not have a specific dollar amount attached, making them more challenging to quantify. Examples include physical pain and suffering, emotional distress, mental anguish, inconvenience, disfigurement, and loss of enjoyment of life. Economic only coverage limits compensation to quantifiable economic losses, meaning the policyholder cannot receive benefits for pain and suffering or other intangible harms. This limitation allows insurers to offer this coverage at a reduced premium.

What Economic Only Coverage Pays For

This coverage directly addresses the tangible costs associated with bodily injuries and, in some instances, property damage. It is designed to cover expenses that have a clear monetary value. Policyholders can expect reimbursement for medical bills, which encompass emergency room visits, hospital stays, surgical procedures, and ongoing rehabilitation therapies. Prescription medications and necessary medical devices also fall under this category of covered expenses.

Economic only coverage provides compensation for lost income or wages if the injuries sustained prevent an individual from performing their work duties. This includes both immediate lost earnings and a reduction in future earning capacity due to a long-term impairment. While primarily focused on bodily injury, some policies cover vehicle repair or replacement costs if the damage is caused by an uninsured driver.

Distinctions Among Uninsured Motorist Policies

A standard UM policy covers both economic losses, such as medical bills and lost wages, and non-economic damages, including pain and suffering. This comprehensive approach aims to fully compensate an injured party for both their financial expenditures and the intangible impact of an accident.

In contrast, economic only uninsured motorist coverage provides a more restricted form of protection. Underinsured motorist (UIM) coverage addresses situations where the at-fault driver has some insurance, but their policy limits are insufficient to cover the full extent of the damages incurred by the policyholder. UIM coverage then steps in to cover the remaining costs up to the policyholder’s UIM limits, providing an additional layer of financial security against inadequately insured drivers.