Uninsured and Underinsured Motorist Coverage, Simply Explained

Key takeaways

• UM coverage helps when an at-fault driver has no liability insurance and, under many policies, after a hit-and-run.
• UIM coverage helps when an at-fault driver's liability limits are too low to cover your losses.
• Some states require UM or UIM; many require insurers to offer it and let you decline it in writing.
• Rules vary by state, including how UIM is calculated, so read your policy's definitions closely.

Why this coverage exists

Liability insurance pays for the damage a driver causes to others, but only if that driver actually has it, and has enough. Some drivers carry no insurance at all, some carry only their state's minimum limits, and some leave the scene before anyone learns who they are. Uninsured and underinsured motorist coverage lets your own policy stand in for the at-fault driver's missing or insufficient insurance.

Uninsured motorist coverage (UM)

UM coverage applies when you are hurt, or your property is damaged, by a driver who is legally at fault and has no liability insurance. It usually comes in two parts.

Uninsured motorist bodily injury

Pays for injuries to you and your passengers, such as medical bills and lost wages and, in many states, compensation for pain and suffering, up to your UM limits. Depending on the policy wording, it can also protect you and household members as pedestrians or as passengers in someone else's car.

Uninsured motorist property damage

In states where it is offered, uninsured motorist property damage coverage pays for damage to your car caused by an uninsured driver. It may carry a deductible and its own limit. Where it isn't available, your collision coverage is usually the fallback.

Hit-and-run crashes

If the other driver can't be identified, many policies treat the crash like one with an uninsured driver, at least for injuries. Rules for property damage in hit-and-run crashes vary more by state and policy. Policies commonly require that the crash be reported to police promptly, so make a report right away.

Underinsured motorist coverage (UIM)

UIM coverage applies when the at-fault driver has liability insurance, but not enough to cover your injuries. Imagine a driver with $25,000 of bodily injury coverage causes a crash in which your medical bills and lost income total $60,000. Their insurer pays up to its $25,000 limit. UIM coverage on your own policy can then help with what remains, up to your UIM limit and according to your state's rules.

Two ways states calculate it

States handle UIM in one of two broad ways, and the difference can matter a great deal:

• Excess or "add-on" UIM. Your UIM limit is available on top of whatever the at-fault driver's insurance pays.
• Reduction or "offset" UIM. Your UIM limit is reduced by what the at-fault driver's insurance pays, so it effectively fills the gap between their limit and yours.

What your state requires

States take different approaches. Some require drivers to carry UM coverage, some require UIM as well, and many require insurers to offer it while letting you decline it, often only in writing. Required minimum limits also vary. Your state insurance department is the authoritative source for the rules where you live.

How it fits with coverage you may already have

• Health insurance may cover your medical bills, but not lost wages or pain and suffering, and it has its own deductibles and copays.
• PIP or MedPay pays certain medical costs regardless of fault, usually up to lower limits. Depending on your state, UM/UIM can pick up where they stop.
• Collision repairs your car regardless of who is at fault, subject to your collision deductible. Where uninsured motorist property damage coverage is available, it may pay for the same damage, sometimes with a lower deductible.

Stacking

In some states, if you insure more than one vehicle, you can combine, or "stack," the UM/UIM limits for each car to reach a higher total. Stacking usually costs more, and not every state allows it. Ask your insurer or agent whether it is available and how it is priced.

Choosing your limits

A common approach is to carry UM/UIM limits that match your bodily injury liability limits, so you are protected from other drivers to the same degree you protect them from you. State rules on the UM/UIM limits you can buy vary, so ask what is available where you live. Consider how good your health coverage is, how long you could manage without working, and who depends on your income. Our guide to coverage types explains how liability limits are written.

If you need to make a claim

1. Report the crash to police promptly, especially after a hit-and-run.
2. Notify your own insurer as soon as you can. Policies set notice requirements, and late notice can complicate a claim.
3. Collect the other driver's details, including any insurance information, and keep your medical records and bills together.
4. Talk to your insurer before settling with the at-fault driver's insurer in a UIM case. Many policies require notice, and sometimes consent, before you accept a settlement, and skipping that step can affect your UIM claim.

For the steps to take at the scene itself, see what to do right after a car accident.

Helpful official resources

Independent public resources for going further. AutoQB is not affiliated with any of these organizations.

• National Association of Insurance Commissioners (NAIC)The organization of the chief insurance regulators of the 50 states, the District of Columbia and the U.S. territories.
• USA.govThe official web portal of the U.S. government.

This guide is general educational information about how car insurance commonly works in the United States. Coverage terms, rules and requirements vary by state and by insurer, so your policy documents, your insurer or agent, and your state insurance department are the authorities for your situation.