Important
– Underinsured motorist coverage (UIM) protects you when an at-fault driver’s liability insurance limit is too low to cover your injuries and/or property damage. It does not apply when the at-fault driver is unidentified—that is usually handled by uninsured motorist (UM) coverage.
– UIM rules, required availability, and the types of UIM offered vary by state. Check your state law and your insurer’s policy options before assuming coverage applies.
Key Takeaways
– UIM fills the gap between the at-fault driver’s liability limits and your actual losses (up to your UIM policy limits).
– UIM typically comes in two forms: UIM bodily injury (medical bills, lost wages) and UIM property damage (repair or replacement of your vehicle). Some states offer only UIM bodily injury.
– UIM is required in some states, optional in others. In states that allow it, you can usually buy it as an endorsement to your auto policy.
– Stacking (combining limits for multiple vehicles/policies) may be available in some states and can increase coverage after a loss.
– Hit-and-run incidents are normally handled by uninsured motorist (UM) coverage, not UIM, unless state rules or your collision coverage specify otherwise.
How Underinsured Motorist Coverage Works
– Scenario: You’re in an accident that wasn’t your fault. The other driver is found liable but carries only the state-minimum liability—say $25,000 per person—while your medical bills and vehicle damage total $60,000.
– Step 1: You (or your attorney) pursue a claim with the at-fault driver’s liability insurer. That insurer pays up to its policy limits (e.g., $25,000).
– Step 2: If you have UIM, you submit a claim to your own insurer for the remaining unpaid, covered losses (up to your UIM limit). If your UIM limit is $50,000, your insurer would pay the additional $35,000 (minus any applicable offsets or deductible), subject to policy terms.
– Important constraints:
• You cannot recover more than your actual damages.
• Your UIM payout is limited to your own policy limits.
• Each state may have offsets, subrogation rules, and procedural steps that affect recovery.
Types of UIM coverage
– UIM Bodily Injury (UIM-BI): Pays medical expenses, rehabilitation, lost wages, and sometimes pain-and-suffering for injuries that exceed the at-fault driver’s bodily injury liability limits.
– UIM Property Damage (UIM-PD): Pays to repair or replace your vehicle and other property damage beyond the at-fault driver’s property damage liability limits. Note: Some states do not offer UIM-PD; some insurers bundle the two or offer only BI.
Stacking
– Stacking lets you combine coverage limits from multiple policies or multiple vehicles on the same policy to increase your total available UIM limit (e.g., two vehicles each with $35,000 UIM stacked = $70,000 available).
– Availability and rules for stacking depend on state law and your insurer’s policy. Some states prohibit stacking; others allow it if you purchased stacked limits. Always confirm with your insurer or state insurance department.
Where Is Underinsured Motorist Coverage Required?
– States that require UIM (or the equivalent) in some form: Connecticut, Kansas, Maine, Maryland, Minnesota, Nebraska, North Carolina, North Dakota, Oregon, South Dakota, and Vermont. (Industry and state sources vary—always check your state’s statute or department of insurance.)
– Special/conditional scenarios:
• New Hampshire and Virginia: UIM applies only if you buy insurance (NH has no mandatory insurance requirement; VA allows opt-out for a fee).
• Rhode Island: UIM may be required if you purchase liability limits above the state minimum.
• Illinois: If you purchase UM coverage higher than the state minimum, you must also buy UIM at that higher level.
• New Jersey: UIM is required if you select a standard auto policy, but not a basic policy.
– Because state rules change and can be nuanced, confirm current requirements with your state Department of Insurance or DMV.
What Is Covered by Underinsured Motorist Coverage?
– Typical UIM coverages:
• Medical expenses, hospital bills, rehabilitation, future medical care for injuries caused by an underinsured at-fault driver.
• Lost income and diminished earning capacity related to crash injuries.
• Reasonable and necessary property damage costs (where UIM-PD is available).
• In some cases, other special damages such as loss of consortium or pain-and-suffering, if allowed by state law and your policy.
– What’s generally not covered:
• Damage and injuries you caused (your own liability claims).
• Intentional acts or criminal acts by the insured.
• Non-covered property or non-accident-related medical conditions.
– You can’t recover more than the actual damages incurred and coverage is subject to policy conditions, exclusions, and limits.
Does Underinsured Motorist Insurance Cover Hit-and-Runs?
– No—UIM is designed to cover cases where the at-fault driver is identified but lacks sufficient insurance.
– Hit-and-run drivers are typically treated as uninsured motorists (UM). Uninsured motorist coverage (UM) is what normally covers hit-and-run incidents if you have it.
– Some states or insurers require or permit using collision coverage (subject to deductible) for hit-and-run vehicle damage instead of UM. Check your policy for uninsured motorist provisions and collision coverage terms.
Benefits of Underinsured Motorist Coverage
– Covers the “gap” when an at-fault driver’s liability insurance is insufficient.
– Protects against catastrophic out-of-pocket medical bills and unrepaired vehicle damage that exceed at-fault limits.
– May cover lost wages and future medical care costs.
– If you live in or drive through states with low minimum liability limits, UIM can be especially important.
– Stacking (when available) can substantially increase your available recovery after a serious crash.
Fast Fact
– Liability insurance is mandatory in most states, but state minimums are often far lower than costs from serious crashes—UIM can be the difference between being fully compensated and bearing large out-of-pocket expenses.
Practical Steps — Before an Accident (How to Buy & Prepare)
1. Check your state rules: Visit your state Department of Insurance or DMV website (or ask your agent) to learn what UM/UIM options are required or available in your state.
2. Review your current policy: Identify whether you have UM and UIM, the limits, and whether stacking is allowed or already applied.
3. Choose limits wisely: Consider buying UIM limits at least equal to your own bodily injury liability limits; higher limits offer better protection. Think about future wages, medical inflation, and possible long-term care needs.
4. Decide on stacking: Ask your insurer if stacked limits are available and how they would apply. If allowed and affordable, stacking can make a meaningful difference for severe injuries.
5. Consider combined coverage: If an insurer offers only BI or only PD, evaluate whether you need both—many drivers prioritize UIM-BI because medical expenses can be the most costly.
6. Compare costs: UIM often adds a relatively small premium but can shield you from major financial loss—get quotes from multiple insurers.
Practical Steps — After an Accident (Filing a UIM/UM Claim)
1. Safety & emergency: Seek medical attention immediately for injuries. Follow medical advice—untreated injuries can hurt your claim.
2. Identify and document: If possible, collect the at-fault driver’s name, insurance information, license plate, photos of the scene, vehicle damage, and witness contact info. Obtain a police report.
3. Notify insurers: Report the accident to both the at-fault driver’s insurer and your insurer promptly. If the other driver is unidentified (hit-and-run), report to your insurer under your UM coverage.
4. Preserve records: Keep medical records, bills, wage-loss documentation, repair estimates, receipts, and any correspondence with insurers.
5. Coordinate claims: Pursue the at-fault driver’s liability limits first; then submit a UIM claim to your insurer for amounts exceeding those limits. Your insurer may require documentation of the liability insurer’s payment or settlement.
6. Watch timelines and procedures: States and insurers have strict deadlines and procedural requirements for UM/UIM claims—adhere to notices, proof-of-loss forms, and litigation deadlines.
7. Consider an attorney: For serious injuries or disputed claims, consult a lawyer experienced in auto insurance and UM/UIM claims. Lawyers can protect rights, negotiate settlements, and handle subrogation issues.
8. Subrogation and offsets: If your insurer pays UIM benefits, it may pursue the at-fault driver’s insurer (subrogation). Some state rules and policy terms allow offsets (reducing your UIM recovery by amounts collected from the at-fault insurer), so understand how your insurer handles this.
The Bottom Line
Underinsured motorist coverage is a cost-effective way to guard against the financial risk posed by other drivers who do not carry sufficient liability insurance. It fills the gap between the at-fault driver’s limits and your actual damages, subject to your policy limits and state rules. Because availability, mandatory status, and details (stacking, offsets, whether property damage is included) differ by state and insurer, review your policy, compare quotes, and consult your state department of insurance or an agent to ensure you have the protection you need.
Selected Sources
– Investopedia. “Underinsured Motorist Coverage.” (Primary summary source)
– Allstate. “Uninsured Motorist Coverage and Underinsured Motorist Coverage.”
– Nationwide. “Underinsured Motorist Coverage.”
– Progressive. “Car Insurance Requirements by State” and “What Is Uninsured Motorist Coverage?”
– South Dakota Department of Labor and Regulation, Division of Insurance. “Automobile Insurance.”
– Allstate. “Stacked vs. Unstacked Car Insurance.”
– New Hampshire Insurance Department. “2022 Automobile Insurance Consumer Frequently Asked Questions.”
– Rhode Island Department of State. “Uninsured and Underinsured Motorist Insurance (230-RICR-20-05-1).”
– Illinois Department of Insurance. “Auto Insurance Shopping Guide.”
– New Jersey Department of Banking and Insurance. “New Jersey Auto Insurance Buyer’s Guide.”
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.