Key takeaways
– The “limits trigger” for underinsured motorist (UIM) coverage is one of two common ways a UIM endorsement can be triggered. It allows a UIM claim when the at-fault driver’s liability limits are lower than the insured’s UIM limits. [Investopedia]
– The limits trigger is different from the “damages (or coverage) trigger,” which requires the insured’s damages to exceed the at-fault driver’s liability limits before UIM applies.
– UIM coverage typically pays the difference between what the at-fault driver’s insurer pays and the insured’s actual losses, up to the insured’s UIM limit. State laws (including stacking/anti‑stacking rules) and policy language vary, so results can differ by jurisdiction and policy. [Investopedia; Insurance Research Council]
What UIM coverage protects against
– UIM coverage protects you when an at-fault driver’s liability insurance is insufficient to fully compensate your losses (medical bills, lost wages, pain & suffering, sometimes property damage).
– It’s different from uninsured motorist (UM) coverage, which applies if the at-fault driver has no insurance at all. UM and UIM are often sold together as UM/UIM. [Investopedia]
What the “limits trigger” means
– Limits trigger (sometimes called a policy-limits trigger): UIM coverage is “triggered” based solely on a comparison of the at-fault driver’s liability policy limits and your UIM limits. If the at-fault driver’s policy limit is less than your UIM limit, your UIM coverage is available—even if your actual damages are below those limits.
– Practical implication: If your UIM limit is higher than the at-fault driver’s liability limit, you can assert a UIM claim to recover the shortfall up to your UIM policy limit.
Limits trigger vs. damages (coverage) trigger — simple examples
– Scenario A (limits trigger):
• Your UIM limit: $500,000
• At-fault driver’s limit: $100,000
• Your damages: $150,000
• Result (limits trigger): At-fault insurer pays $100,000; your UIM pays the $50,000 shortfall (up to your UIM limit). UIM is available because $100K < $500K.
– Scenario B (damages trigger):
• Same limits as above but your damages are $90,000
• Result (damages trigger): UIM would typically not be available because your damages ($90K) are less than the at-fault driver’s limit ($100K). Under a limits trigger, depending on policy language, the UIM might still be considered available because the at-fault limit is less than your UIM limit, but because damages are less than what the at-fault insurer can pay, you normally would just accept the at-fault insurer’s payment.
How UIM payment typically works (setoffs and subrogation)
– Payment flow: you first collect from the at-fault driver’s liability insurer up to their limits; then your UIM insurer pays the difference between that payment and your damages, up to your UIM limit.
– Set-off/offset: most UIM policies reduce what the UIM carrier pays by amounts you received from the at-fault insurer and sometimes by other collateral sources.
– Subrogation: if your UIM insurer pays you, the insurer may have subrogation rights to pursue the at-fault party or their insurer to recover amounts it paid on your behalf. [Investopedia]
State law and policy variations
– States differ on required UM/UIM offerings, whether insurers must offer UIM and whether stacking (combining limits from multiple vehicles/policies) is allowed.
– Every U.S. state except New Hampshire requires drivers to carry some auto insurance of a sort; however, minimums are often inadequate for serious injuries. [Connecticut General Assembly; Insurance Research Council]
– Because of these variations, the exact operation of a limits trigger (and whether an insurer must use it) depends on policy wording and state law. Consult your policy and state statutes or an attorney/agent for specifics.
Practical steps: If you’re involved in an accident with an underinsured driver
1. Seek medical care immediately and keep records (medical reports, bills, prescriptions).
2. Notify both the at-fault driver’s insurer and your own insurer as soon as possible. Report the facts; do not speculate about fault or damages.
3. Preserve evidence: police report, photos of the scene/vehicles/injuries, witness contact info.
4. Get the at-fault driver’s insurance information and request (or obtain through your insurer) confirmation of their policy limits.
5. Document economic losses (medical bills, wage statements) and non‑economic losses (pain and suffering notes).
6. If the at-fault insurer’s payment (or offer) is inadequate relative to your damages and their limit is less than your UIM limit, notify your UIM carrier and present a demand for UIM benefits. State that you believe your claim meets the policy’s trigger (limits trigger) and provide evidence of at-fault limits and your damages.
7. Keep records of all communications; request written explanations for denials or offsets.
8. If the claim is disputed, consider hiring an attorney experienced with UM/UIM claims—especially for serious injuries—because legal strategies and state rules (e.g., regarding setoffs and stacking) can materially affect recovery.
How to choose UIM limits (practical guidance)
– Don’t rely on state minimums: minimum liability insurance is meant to meet public policy minimums, not to protect your assets.
– Match or exceed liability limits: a common recommendation is to purchase UIM limits at least equal to your own liability limits; many advisors recommend $250k/$500k or higher depending on assets and household exposure.
– Consider assets and future earnings: if you have significant assets or high earning potential, choose higher limits to protect against catastrophic loss.
– Review cost-benefit: UIM is often relatively inexpensive compared to the additional protection it provides. Ask your agent for quotes for multiple limit options.
– Consider stacking (if allowed): stacking can increase available coverage (e.g., combining UIM limits from multiple vehicles), but some states or policies ban stacking.
Common pitfalls and FAQs
– “My UIM denied because the at-fault insurer paid something.” Not necessarily — what matters under a limits trigger is the at-fault policy limits relative to your UIM limits and how your damages compare. Insurer denials should be reviewed against policy language and state law.
– “If I accept the at-fault insurer’s payment, can I still pursue UIM?” Often yes, up to the UIM limit and subject to offsets, but settlements can affect rights—always read settlement paperwork and consult counsel before signing releases.
– “Will my UIM insurer pay first?” Usually you collect from the at-fault insurer first; some policies and situations allow you to pursue UIM simultaneously, but the UIM insurer typically applies offsets for what the at-fault insurer has or will pay.
– “Are underinsured drivers common?” Studies have shown that a meaningful share of drivers are underinsured; for example, the Insurance Research Council estimated about one in eight drivers were uninsured in 2015, and many more carry only minimum limits that are likely insufficient for serious claims. [Insurance Research Council]
When to get professional help
– For significant injuries, complicated liability/disputes, or policy denials, consult an attorney experienced in UM/UIM law in your state. Because UIM outcomes are driven by policy wording and state court decisions/statutes, local legal advice is often necessary.
Sources and further reading
– Investopedia. “Underinsured Motorist Coverage Limits Trigger.” Accessed Jan. 30, 2021.
– Insurance Research Council. “One in Eight Drivers Uninsured.” 2015. (report)
– Connecticut General Assembly. “Auto liability insurance requirements in other states.” Accessed Jan. 30, 2021.
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.