What Is Underinsured Motorist Coverage?
Underinsured motorist (UIM) coverage is a component of your auto insurance policy that pays for your injuries and damages when an at-fault driver's insurance limits are too low to fully compensate you.
How UIM works:
- 1. **At-fault driver causes an accident with serious injuries/damages**
- 2. **Their liability insurance pays up to their policy limit** (often just $25,000-$50,000)
- 3. **Your damages exceed their coverage** (medical bills, lost wages, pain/suffering total $150,000)
- 4. **Their insurer pays their maximum** ($50,000)
- 5. **Your UIM coverage pays the remaining balance** (up to your UIM limit)
- 6. **You're protected from massive out-of-pocket costs**
Example: • Your medical bills: $120,000 • Lost wages: $30,000 • Total damages: $150,000 • At-fault driver's liability: $50,000 (their state minimum) • Their insurance pays: $50,000 • Your UIM coverage (250/500): Pays remaining $100,000 • Without UIM: You pay $100,000 out-of-pocket or go into debt • With UIM: You're fully compensated
Why UIM matters: Many drivers carry only state minimum liability—often $25,000-$50,000 per person. A serious accident with hospitalization, surgery, and long-term treatment easily exceeds these limits. UIM ensures you don't bear the financial burden of someone else's decision to carry inadequate insurance.
For a complete overview, see our guide on uninsured motorist coverage (which often includes UIM).
UIM vs. UM: What's the Difference?
Uninsured motorist (UM) and underinsured motorist (UIM) are related but distinct coverages:
Uninsured Motorist (UM): • Applies when at-fault driver has NO insurance • Covers 100% of your damages (up to your UM limit) • Also typically covers hit-and-run accidents • More straightforward: no insurance = UM applies
Underinsured Motorist (UIM): • Applies when at-fault driver HAS insurance but not enough • Covers the GAP between their liability limit and your damages • Only kicks in after their insurance pays its maximum • More complex: requires coordination between two policies
Coverage overlap: Both UM and UIM cover: • Medical expenses • Lost wages and future earning capacity • Pain and suffering • Rehabilitation costs • Funeral expenses (if fatal)
Bundled vs. separate: Many insurers bundle UM and UIM as "UM/UIM coverage" with a single limit. Some states and insurers offer them separately.
Which do you need? Both. With 12.6% of drivers uninsured and millions more carrying inadequate minimum coverage, you need protection in both scenarios. Fortunately, UM/UIM bundled coverage costs just $150-300/year—excellent value for comprehensive protection.
For more on when you'd use UM, see our article on what happens if someone hits me and has no insurance.
How UIM Claims Work
Filing a UIM claim is more complex than filing a standard UM claim because it involves coordinating with the at-fault driver's insurance first.
Step-by-step UIM claims process:
1. Accident occurs and other driver is at fault • File a police report immediately • Seek medical attention right away (documents injuries) • Exchange information with the other driver • Take photos and gather witness information
2. File a claim with the at-fault driver's insurance • Their liability insurance is primary (pays first) • Provide documentation: police report, medical bills, lost wage statements • Their insurer investigates and makes a settlement offer
3. At-fault driver's insurance pays their policy limit • If your damages are $150,000 and their limit is $50,000, they pay $50,000 • You receive a release stating their policy limit has been exhausted • This triggers your UIM coverage
4. File a UIM claim with YOUR insurance company • Notify your insurer that the at-fault driver's coverage was insufficient • Provide proof their policy limits were exhausted • Submit additional documentation: full medical records, lost wage calculations, pain/suffering evidence
5. Your insurer evaluates your total damages • They calculate: medical expenses + lost wages + pain/suffering + other damages • They subtract what the at-fault driver's insurance already paid • They offer a settlement for the remaining balance (up to your UIM limit)
6. Settlement or arbitration • Review the offer carefully—you can negotiate • If disputes arise, arbitration or litigation may be necessary • You're technically claiming against your own policy, which can create complexity
7. Payout • Once settled, your insurer pays the UIM benefits • Combined with the at-fault driver's payout, you should be fully compensated (up to your combined limits)
Important notes: • No double recovery: You can't collect more than your total damages. If at-fault driver pays $50k and your damages are $50k, UIM doesn't apply. • No rate increase: UIM claims should NOT increase your rates—the accident wasn't your fault. • Timeline: UIM claims take longer than standard claims due to dual-insurer coordination.
How Much UIM Coverage Do You Need?
Standard recommendation: Match your liability limits
If you carry: • 100/300 liability → buy 100/300 UIM • 250/500 liability → buy 250/500 UIM • 500/500 liability → buy 500/500 UIM
Why match limits?
Medical costs are the same regardless of who causes the accident. If you think $250,000 is adequate to protect others when you're at fault, you need the same protection when underinsured drivers are at fault.
When to buy MORE UIM than liability:
1. High-net-worth individuals • Significant assets to protect • Higher medical costs (private hospitals, specialists) • Greater lost income potential • Consider 500/500 UIM or umbrella policy
2. States with low minimum liability requirements • Many states require only $25,000-$50,000 per person • More drivers carry inadequate coverage • Higher risk of UIM scenarios • Examples: California ($15k minimum), Florida ($10k), Texas ($30k)
3. High-traffic or dangerous areas • More accidents = higher exposure • Greater likelihood of serious injury accidents • More underinsured drivers on the road
4. Poor health insurance or high deductibles • Health insurance with $5,000+ deductibles • Limited coverage or high out-of-pocket maximums • UIM becomes primary protection for medical costs
5. Family with multiple drivers • Multiple people at risk • Higher statistical chance of UIM scenario • Protect all household members adequately
Cost comparison: • 100/300 UM/UIM: ~$150/year • 250/500 UM/UIM: ~$200/year • 500/500 UM/UIM: ~$280/year
The difference between low and high limits is typically just $50-130/year—a trivial cost for significantly better protection.
Pro tip: Never buy liability coverage higher than your UM/UIM. If you're willing to pay to protect others with $300k liability, protect yourself with $300k UM/UIM.
State Minimum Liability Requirements: Why UIM Is Critical
State minimum liability requirements are shockingly low—and millions of drivers carry only the minimum.
Examples of state minimums (per person / per accident): • California: $15,000 / $30,000 • Florida: $10,000 / $20,000 (PIP state, no bodily injury requirement) • Texas: $30,000 / $60,000 • New York: $25,000 / $50,000 • Pennsylvania: $15,000 / $30,000 • Arizona: $25,000 / $50,000
What these limits mean: If a Florida driver with minimum coverage causes a serious accident, their insurance pays a maximum of $10,000 per injured person. If your medical bills are $80,000, you're stuck with $70,000 in unpaid costs—unless you have UIM coverage.
How common are minimum-coverage drivers? About 40-50% of insured drivers carry only state minimum liability (or close to it). Combined with 12.6% uninsured drivers, more than half of drivers on the road can't adequately compensate you in a serious accident.
The takeaway: State minimums were set decades ago and haven't kept pace with medical costs. A serious accident in 2026 costs $50,000-$300,000+—far exceeding most state minimums. UIM coverage bridges this dangerous gap.
For more on state requirements, see our guide on minimum car insurance requirements by state.
UIM Stacking: Doubling or Tripling Your Protection
In some states, you can "stack" UIM coverage to multiply your protection.
What is stacking? Stacking allows you to combine UIM limits from multiple vehicles on your policy.
Example: • You insure 2 cars with 100/300 UM/UIM each • Without stacking: $100,000 per person / $300,000 per accident limit • With stacking: $200,000 per person / $600,000 per accident limit (2 vehicles × 100/300)
Types of stacking:
1. Intra-policy stacking (more common) • Combine limits from multiple vehicles on your policy • Example above: 2 cars = double limits
2. Inter-policy stacking (rare) • Combine limits from multiple policies you own • Example: You have a personal policy and a business auto policy—stack both
States that allow stacking: ~30 states allow some form of stacking, including: • Florida (intra-policy; inter-policy requires specific policy language) • Pennsylvania, Missouri, Ohio, Oklahoma, Texas (varies by insurer) • Some states mandate stacking; others make it optional
States that prohibit stacking: ~20 states prohibit stacking, including: • California, Georgia, Illinois, Michigan, North Carolina
Cost of stacking: Stackable UM/UIM costs 30-50% more than non-stacking. For a family with 2 cars: • Non-stacking 100/300 UM/UIM: $150/year • Stacking 100/300 UM/UIM: $195-225/year • Extra cost: $45-75/year for double protection
Is stacking worth it? Yes, if available. For an extra $50-100/year, you double or triple your protection—critical for serious accidents with multiple injured family members.
How to get stacking: • Check if your state allows it • Ask your insurer if stacking is available • Opt-in if it's optional (some states require insurers to offer it) • Review your policy declarations page—it should specify "stacked" or "non-stacked"
Do You Need UIM If You Have Good Health Insurance?
Yes, you still need UIM coverage even with excellent health insurance.
Health insurance covers medical bills, but UIM covers much more:
What health insurance covers: • Hospital bills, surgery, emergency room • Doctor visits and prescriptions • Physical therapy and rehabilitation • Subject to deductibles, copays, and out-of-pocket maximums
What health insurance does NOT cover: • Lost wages and future earning capacity • Pain and suffering • Loss of enjoyment of life • Emotional distress • Permanent disability compensation • Funeral costs (life insurance may help, but not health insurance) • Your health insurance deductible and out-of-pocket costs
UIM covers all of the above.
In serious accidents, non-medical damages often exceed medical costs: • Medical bills: $80,000 • Lost wages (6 months): $30,000 • Future lost earning capacity (permanent disability): $200,000 • Pain and suffering: $50,000 • **Total: $360,000**
Health insurance pays the $80,000 in medical costs (minus your deductible). Without UIM, you're stuck with $280,000 in uncompensated damages if the at-fault driver has inadequate coverage.
Bottom line: Health insurance and UIM are complementary, not redundant. You need both.
Frequently Asked Questions
Underinsured motorist (UIM) coverage pays for your injuries and damages when an at-fault driver has insurance but not enough to fully compensate you. UIM covers the gap between their liability limit and your total damages. For example, if your medical bills are $100,000 and the at-fault driver's insurance pays only $25,000, your UIM pays the remaining $75,000 (up to your UIM limit).
Uninsured motorist (UM) applies when the at-fault driver has NO insurance. Underinsured motorist (UIM) applies when the at-fault driver HAS insurance but not enough to cover your damages. Both are critical: UM protects against 12.6% of drivers with zero insurance, UIM protects against millions more carrying inadequate minimum coverage.
UIM coverage typically costs $75-150/year when bundled with UM as UM/UIM. Total UM/UIM cost is usually $150-300/year, or 5-15% of your total premium. Higher limits (250/500 vs. 100/300) add just $50-80/year. Stackable UIM costs 30-50% more but provides significantly greater protection.
Yes. Health insurance covers medical bills but not lost wages, pain and suffering, future earning capacity, or other non-medical damages. In serious accidents, non-medical damages often exceed medical costs. UIM provides comprehensive compensation that health insurance won't cover. Both are essential.
It depends on your state. About 20 states require UM/UIM coverage (often bundled). In other states, it's optional but insurers must offer it. Even where optional, UIM is strongly recommended—40-50% of insured drivers carry only state minimums ($25,000-$50,000), far below the cost of serious accidents.
UIM stacking allows you to combine limits from multiple vehicles on your policy. Example: Two cars with 100/300 UIM each = 200/600 total protection with stacking. Stacking costs 30-50% more but provides significantly greater protection. It's available in about 30 states and well worth the extra cost for families with multiple vehicles.