What Is Underinsured Motorist Coverage and Do You Need It?
In a Nutshell: Underinsured Motorist (UIM) coverage kicks in when the at-fault driver has insurance, but not enough to cover all your medical bills and damages. If their policy limits are $25,000 and your injuries cost $80,000, your UIM coverage can cover the remaining $55,000. It's inexpensive and highly recommended protection.
What Underinsured Motorist Coverage Pays For
UIM coverage fills the gap between what the at-fault driver's insurance pays and the actual cost of your damages:
| Expense | Paid By At-Fault Driver's Insurance | Paid By Your UIM | You Pay |
|---|---|---|---|
| Medical bills ($75,000) | $25,000 (their limit) | $50,000 (up to your limit) | $0 (if UIM limit is $50k+) |
| Lost wages ($20,000) | Their bodily injury limit | Your UIM coverage | Remaining balance |
| Pain & suffering | Their limit | Your UIM coverage | Remaining balance |
How UIM Coverage Works
UIM coverage doesn't simply double your protection. It works on a difference-in-limits basis:
Example: You have $100,000 UIM coverage. The at-fault driver has $25,000 bodily injury liability. Your total damages are $90,000.
- The at-fault driver's insurer pays $25,000 (their full limit)
- Your UIM coverage covers the remaining $65,000 (up to your $100,000 limit)
- Total recovery: $90,000
⚠️ Some states use a "reduction" method where UIM only pays the difference between your limit and the other driver's limit. Stacking rules vary by state.
UM vs. UIM: What's the Difference?
| Feature | Uninsured Motorist (UM) | Underinsured Motorist (UIM) |
|---|---|---|
| When it applies | Other driver has NO insurance | Other driver has too little insurance |
| Trigger | Zero insurance on their end | Their limits are exhausted |
| Typical bundled? | Usually sold as UM/UIM | Usually sold as UM/UIM |
| Premium annual | $50–$150 | $30–$100 (often included in UM) |
How Common Are Underinsured Drivers?
Even in states with mandatory insurance, many drivers carry state-minimum limits that are far too low:
| State | Minimum Liability | Typical Medical Cost After Serious Accident | Coverage Gap |
|---|---|---|---|
| Florida | $10,000 PIP | $50,000+ | $40,000+ |
| California | $15,000 | $75,000+ | $60,000+ |
| Texas | $30,000 | $75,000+ | $45,000+ |
| Most states | $25,000 | $75,000+ | $50,000+ |
An estimated 20–25% of insured drivers carry only state minimum limits — making them effectively underinsured in any serious accident.
States That Require UIM Coverage
While many states require UM coverage, fewer mandate UIM. However, UIM is usually offered alongside UM:
| Requirement Type | States |
|---|---|
| Must be offered (but not required) | Most states — insurers must offer UIM at every renewal |
| Required | Maine, Minnesota, North Dakota, South Dakota, Vermont, Wisconsin |
| Not available | A few states where UIM is excluded or structured differently |
How Much UIM Coverage Should You Carry?
| Scenario | Recommended UIM Limit | Rationale |
|---|---|---|
| Employer-provided health insurance | Match liability limits | Health insurance covers medical, but not lost wages/pain |
| No health insurance | 250/500 minimum | UIM becomes your primary medical coverage in an accident |
| High net worth | $500,000+ | Protects assets from being targeted in lawsuits |
| Multiple passengers | 300/300 minimum | Covers your family members in the car |
| Frequent highway driver | 250/500 minimum | Higher crash severity = higher medical costs |
Expert recommendation: Carry UIM limits that match your liability limits. If you carry 100/300 liability, carry 100/300 UIM. It typically adds just $30–$80 per year to your premium.
Making an Underinsured Motorist Claim
- Exhaust the at-fault driver's policy — Their insurer must pay their full limit first
- Notify your insurer — Inform them you'll be filing a UIM claim
- Submit documentation — Medical records, bills, lost wage verification
- Your insurer may subrogate — They can go after the at-fault driver
- Arbitration may be required — If you and your insurer can't agree on damages
⚠️ Tip: Never sign a release from the at-fault driver's insurance company without consulting your own insurer first. Doing so may waive your right to UIM coverage.
UIM and Stacking
In some states, if you have multiple vehicles on your policy, you can stack UIM coverage — meaning you combine the limits from all vehicles. Example: Three cars with $100,000 UIM each = $300,000 available. However, stacking is prohibited in some states (like Texas and Ohio).
Key Takeaways
- UIM coverage fills the gap when the at-fault driver's insurance doesn't cover all your damages
- 20–25% of insured drivers carry only state minimum limits, making them effectively underinsured
- UIM covers medical bills, lost wages, and pain and suffering above the at-fault driver's limits
- It's very inexpensive — typically $30–$80 per year
- Match your UIM limits to your liability limits
- Never sign a release from the other driver's insurer without consulting your own
Last updated: July 2026
Disclaimer: This article provides general information about underinsured motorist coverage. Coverage availability, stacking rules, and policy terms vary by state and insurer. Always review your policy documents and consult with a licensed insurance agent for advice specific to your situation.