Uninsured and Underinsured Motorist Coverage, Explained With Examples
If another driver hurts you and has little or no insurance, UM/UIM coverage is what pays your bills. Here is how it works, the two ways UIM is calculated, and why the difference can be tens of thousands of dollars.
Your liability coverage protects other people from you. Uninsured motorist (UM) and underinsured motorist (UIM) coverage protect you from other drivers who can't pay for the harm they cause. If you're seriously injured by a driver with no insurance, or with only a state-minimum policy, UM/UIM is often the coverage that determines whether your medical bills and lost wages actually get paid.
The short version
- Uninsured motorist coverage pays when the at-fault driver has no insurance, and often in hit-and-run cases, subject to policy and state rules.
- Underinsured motorist coverage pays when the at-fault driver's liability limits are too low to cover your damages.
- UM/UIM typically covers bodily injury to you and your passengers. Some states also offer UM property damage for your car.
- States calculate UIM in one of two main ways: reduced by the other driver's limits, or in addition to them. The difference matters a lot.
- Requirements vary: some states require UM/UIM, others require insurers to offer it and let you reject it in writing.
Why it matters
Many drivers carry low liability limits, and some carry none at all. If one of them causes a serious accident, their insurance may cover only a small part of your losses. Pursuing the driver personally for the rest is often impractical if they have few assets. UM/UIM fills that gap through your own policy.
What it typically pays for
- Medical expenses
- Lost wages
- Pain and suffering, where state law allows
- Other damages you could have recovered from the at-fault driver
Exact coverage depends on your policy and state.
How UIM is calculated: two common approaches
A hypothetical accident: you're injured with $150,000 in damages. The at-fault driver has $25,000 in per-person bodily injury liability. You carry $100,000 in UIM coverage.
Approach 1: Reduction ("limits less"). Your UIM limit is reduced by the at-fault driver's liability coverage.
Approach 2: Excess ("add-on"). Your UIM pays on top of the at-fault driver's liability, up to your full UIM limit.
Show the numbers behind this chart
| Total recovered | Uncovered | |
|---|---|---|
| Reduction (limits less) | $100,000 | $50,000 |
| Excess (add-on) | $125,000 | $25,000 |
Under the reduction approach, if your UIM limit equals the other driver's liability limit, your UIM may pay nothing. That's why carrying UIM limits well above common minimums matters.
Stacking
In some states, if you insure multiple vehicles, you can stack UM/UIM limits, combining the limits across vehicles for a single claim. Stacking usually costs more and isn't available everywhere. Some states allow you to waive it.
Uninsured motorist property damage
Some states offer UM property damage (UMPD) coverage for damage to your car caused by an uninsured driver. It may have its own deductible and limit. If you carry collision coverage, it would also cover your car, subject to your collision deductible, and your insurer may pursue the other driver. UMPD can be useful if you've dropped collision on an older car; see when to drop collision and comprehensive.
Hit-and-run
Many UM coverages apply when the at-fault driver can't be identified, often with conditions such as physical contact with your vehicle, prompt police reporting, or independent witnesses. Check your policy and report hit-and-runs right away.
How UM/UIM relates to your other coverage
- Health insurance may pay medical bills first, then seek reimbursement from a recovery.
- Medical payments or personal injury protection pay certain costs regardless of fault, depending on your state.
- Umbrella policies sometimes extend UM/UIM, but many don't. See liability limits and umbrella insurance.
Choosing limits
Many people choose UM/UIM limits that match their own liability limits, on the reasoning that they'd want at least as much protection for themselves as they provide to others. Consider:
- how much income you'd lose if seriously injured;
- your health insurance deductible and out-of-pocket maximum;
- whether you have disability insurance;
- whether your state uses the reduction or excess approach.
Before rejecting UM/UIM
In many states, you must reject UM/UIM coverage in writing, or choose lower limits in writing. Make sure you understand what you'd give up. The premium is often modest compared with the risk it covers.
The takeaway
UM/UIM coverage pays for your injuries when the driver who caused them can't. How your state calculates UIM, whether limits can be stacked, and how high you set the limits can change your recovery by tens of thousands of dollars. Check your declarations page and compare your UM/UIM limits with your liability limits and your own financial exposure.
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