What is underinsured motorist coverage?
Underinsured motorist coverage (UIM) is a type of auto insurance coverage that protects you when you’re in an accident with a driver who doesn’t have enough insurance to cover your damages. While many states require drivers to carry liability insurance, the minimum amounts are often too low to cover serious accidents. That’s where UIM coverage steps in to fill the gap.
How Underinsured Motorist Coverage Works
When you’re hit by an at-fault driver who is underinsured, their insurance will pay up to their policy limits. If your medical bills, lost wages, and other damages exceed those limits, underinsured motorist coverage can help pay the difference. This coverage acts as a safety net, ensuring you’re not left paying out of pocket for someone else’s mistake.
For example, if you have $50,000 in medical bills from an accident and the at-fault driver only has $25,000 in liability coverage, your UIM coverage could help pay the remaining $25,000.
What UIM Coverage Includes
Underinsured motorist coverage typically helps pay for:
- Medical expenses for you and your passengers
- Lost wages if you can’t work due to injuries
- Pain and suffering compensation
- Funeral expenses in fatal accidents
- Long-term care or rehabilitation costs
The Difference Between Uninsured and Underinsured Coverage
While they sound similar, these are two different types of coverage:
Uninsured motorist coverage protects you when the at-fault driver has no insurance at all.
Underinsured motorist coverage protects you when the at-fault driver has insurance, but not enough to cover your damages.
Many insurance companies offer these coverages together as a package, often referred to as UM/UIM coverage.
How Much UIM Coverage Do You Need?
The amount of underinsured motorist coverage you need depends on several factors:
- Your health insurance deductibles and coverage limits
- Your income and potential lost wages
- Your family’s financial situation
- The typical cost of medical care in your area
Many experts recommend matching your UIM limits to your liability coverage limits. If you carry $100,000/$300,000 in liability coverage, consider the same limits for your UIM coverage.
When UIM Coverage Applies
Your underinsured motorist coverage can help with injury compensation in several situations:
- Car accidents where the at-fault driver’s insurance isn’t enough
- Hit-and-run accidents (in some states)
- Accidents involving vehicles not covered by adequate insurance
- Some policies even cover bicycle or pedestrian accidents
State Requirements and Options
Insurance laws vary by state. Some states require UIM coverage, while others make it optional. Even in states where it’s not required, insurance companies must offer it to you. You can choose to reject this coverage in writing, but think carefully before doing so.
Some states use “stacking” rules, which allow you to combine UIM limits across multiple vehicles on your policy for greater protection.
The Cost of Underinsured Motorist Coverage
UIM coverage is generally affordable compared to the protection it provides. The cost typically ranges from $50 to $200 per year, depending on:
- Your location
- Coverage limits you choose
- Your driving record
- Number of vehicles on your policy
Making a UIM Claim
If you need to use your underinsured motorist coverage:
- First, file a claim with the at-fault driver’s insurance
- Document all your damages and expenses
- Once their insurance pays its limit, contact your insurance company
- Provide proof that your damages exceed the at-fault driver’s coverage
- Your insurer will investigate and pay the covered amount up to your UIM limits
Why UIM Coverage Matters
Medical costs continue to rise, and a serious accident can lead to hundreds of thousands of dollars in bills. Many drivers only carry state minimum liability coverage, which might be as low as $25,000 per person. This amount can be exhausted quickly in a serious accident.
Without adequate UIM coverage, you might have to:
- Pay medical bills from your own savings
- Sue the at-fault driver personally (often unsuccessful)
- Declare bankruptcy due to overwhelming medical debt
- Forgo necessary medical treatment
Common Misconceptions About UIM Coverage
Many people misunderstand how underinsured motorist coverage works:
Myth: “My health insurance will cover everything.”
Reality: Health insurance doesn’t cover lost wages, pain and suffering, or other non-medical damages.
Myth: “I can just sue the other driver.”
Reality: If they’re underinsured, they probably don’t have assets worth pursuing.
Myth: “It’s too expensive.”
Reality: UIM coverage is one of the most affordable types of auto insurance coverage.
Making the Right Choice
Underinsured motorist coverage provides valuable protection for a relatively small cost. Given that one in eight drivers on the road is uninsured, and many more carry only minimum coverage, UIM protection helps ensure you’re not financially devastated by someone else’s lack of adequate insurance.
Review your current auto insurance policy to see if you have UIM coverage and whether your limits are sufficient. If you don’t have this coverage or your limits are too low, contact your insurance agent to add or increase it. The peace of mind and financial protection it provides make it a smart addition to your auto insurance coverage.
