Unless you live in New Hampshire or Wisconsin, auto liability insurance is required by state law. And even New Hampshire and Wisconsin have "financial responsibility" laws that require you to have enough assets to pay claims against you if you cause an accident and don't have auto insurance. If you own a car, it must be insured. If it isn't, you could face fines or even a jail sentence.

Mandatory liability insurance can be good public policy — after all, if you hit someone, it's only fair that they should recoup their expenses from you. The damages you cause could end up costing a lot more than the liability insurance limits you pay for.

In practice, not everyone complies with the law. The sheer cost of auto insurance keeps many drivers from purchasing even a basic liability policy. That's why no matter what state you live in, it's prudent to carry uninsured motorist (UM) and underinsured motorist coverage (UIM). UM pays for your injuries when someone with no insurance causes an accident, or when you're hit by a hit-and-run driver; UIM, similarly, pays for your injuries when someone else causes an accident who does have insurance, but not enough to cover all the costs. UM/UIM also pays for your lost wages and pain and suffering.

Health insurance only goes so far

It's true that if you are in an accident that's the uninsured motorist's fault, your health insurance coverage will generally pay for your health care and medical bills related to a car accident — which can easily total tens of thousands of dollars if you have a hospital stay. (In an accident with an insured motorist, health insurance only pays for treatment after the at-fault driver's liability insurance runs out. And if you have UM/UIM coverage, that pays for health care expenses before health insurance kicks in.)

But your health insurance won't pay for lost wages if you miss work, or for pain and suffering resulting from the crash. Lost wages and pain and suffering are paid for by the at-fault driver's liability insurance, and if the other driver doesn't have liability insurance, or doesn't have enough liability insurance, you're out of luck, unless you have UM/UIM coverage or want to pursue the matter in court.

For that reason, UM coverage is a wise buy. In some states, you can also buy uninsured motorist property damage insurance (UMPD), but it is a separate coverage added to your auto policy.

If you don't have UM/UIM coverage and are hit by an uninsured motorist, your only option is to pursue the driver in civil court or small claims court — hardly attractive, cheap or easy options for recouping your costs. Uninsured drivers tend to lack insurance because they cannot afford the premiums, so it is unlikely that they can pay for your medical treatments if they cause an accident, leaving you paying out-of-pocket for an accident that wasn't your fault.

But before you can make a claim on UM/UIM coverage, your insurance company needs to investigate the claim like any other. The insurer must confirm that the other motorist is indeed uninsured or underinsured and that he or she is at fault before it can write you a check for compensation.

What happens when you're hit by an uninsured motorist

After any crash, you should always write down the insurance information and contact information of the other driver. You'll give it to your insurance company when you call to report the accident, and your insurance company will investigate to see who was at fault and whether the other driver is insured.

You can expedite this process by following the basic rules of post-accident information gathering: Get the other driver's name, address and other contact information. Always take down the license plate number and always call the police, even if the accident looks minor. Although a police report isn't always the last word on who caused the accident (unless it contains eyewitness reports or the police officer witnessed the accident) it can help sort out who was at fault.

During any claim investigation, your insurance company's claim representative contacts the other driver to get their side of the story and their insurance information. Sometimes people think they are insured but in fact have a lapsed policy because they did not pay their premium on time. And sometimes they simply don't have insurance, which in most states can be easily verified through the Department of Motor Vehicles.

"It's very straightforward," says Pat Regina of Allstate Insurance Co. "Once it's verified that the other person doesn't have car insurance, virtually nothing can hold up that uninsured motorist claim. It's in everybody's best interest to expedite the claim."

Claims aren't always settled quickly. If you have an uninsured motorist property damage claim, it can be settled in just a few days if you need simple car repairs. Injury claims can take longer to settle as medical bills keep coming in.

                   Comparative negligence can cause holdups

Just because you have UM coverage does not mean you can make a claim for any accident if the other party was uninsured. If the accident was your fault, the other driver's uninsured status has no bearing on the settlement (although the uninsured driver could get a fine or license suspension for breaking compulsory insurance laws).

Comparative negligence laws can affect your uninsured motorist claim.

And in states with comparative negligence laws, you can collect damages only for the percentage of the accident for which you are not at fault. Comparative negligence laws allow damages to be computed according to the percentage of blame that each driver bears.

For example, say Driver A, uninsured, runs a stop sign and rear-ends Driver B. But it's dark outside, and Driver B did not have his headlights on. Driver B's insurance company might decide that he was 30 percent at fault, which entitles him to collect 70 percent of his damages from his uninsured motorist policy. Conversely, Driver A is then entitled to collect 30 percent of his damages from Driver B's liability insurance policy.

When the other driver's insurance is not enough

With UIM, there's a sometimes confusing wrinkle: In some states, benefits you get from your policy are offset by what the other driver's insurance policy pays for. If you're in an accident and end up with $50,000 in medical bills, and the other driver's insurance only pays for $20,000, you would need to have $50,000 in UIM coverage in order to reap the additional $30,000 in benefits. Say you only had $30,000 in UIM coverage — logic says that would be enough to pay for your underinsured claim, right? Actually, you would only get $10,000, because the $20,000 settlement would be deducted from your UIM policy limits.

But in other states, UIM coverage is considered "excess coverage" above and beyond what's paid by the other driver's insurance. So if your total damages are $35,000, the other driver's insurer pays $20,000, and your UIM limit is $20,000, you would still be entitled to a $15,000 payout from your UIM policy.