What Is Underinsured Motorist Coverage and How Does It Work?

Quick Answer: Underinsured Motorist Coverage (UIM) protects you when the at-fault driver has insurance, but their coverage limits are too low to pay for your injuries. In that case, UIM coverage helps cover the remaining medical bills and lost income. Without it, you may have to pay those costs yourself.

What Is Underinsured Motorist Coverage (UIM)?

Underinsured Motorist Coverage (UIM) is part of your car insurance that protects you when the at-fault driver has insurance, but not enough to fully cover your injuries. In other words, the other driver’s liability insurance exists, yet their policy limits fall short of your real costs. 

This coverage works as a backup. First, the at-fault driver’s insurance pays up to its limit. Then, UIM coverage steps in to help cover the remaining personal injury expenses, such as medical bills and lost income. However, it only applies after those limits are used. 

For you, this matters because many drivers carry only state minimum coverage. When serious injuries happen, those limits can be exhausted quickly. That gap is exactly what underinsured motorist coverage is designed to fill.

What Does “Underinsured” Mean in Car Insurance?

In car insurance, underinsured does not mean the other driver has no coverage. It means they have liability insurance, but their policy limits are too low to fully pay for your injuries. 

For example, many drivers carry only the state minimum. That amount may sound reasonable. However, after a serious accident, medical bills, lost wages, and recovery costs can exceed those limits quickly. Once the other driver’s insurance runs out, you are left with a gap. 

That gap is the key issue. Underinsured Motorist Coverage (UIM) exists to help cover what the at-fault driver’s insurance cannot. It does not replace their coverage. Instead, it fills in after their limits are exhausted. 

For you, “underinsured” simply means this. The other driver followed the law, but their coverage still wasn’t enough to protect you.

How Underinsured Motorist Coverage Works

Underinsured Motorist Coverage (UIM) follows a clear process. Knowing the steps helps you understand when it applies and what to expect. 

1. An accident happens: You’re injured, and the other driver is at fault. They have liability insurance, but their limits are low. 
2. The other driver’s insurance pays first: Their insurer covers costs up to their policy limit. This step is required before UIM coverage can be used. 
3. Limits are exhausted: Once those limits run out, unpaid medical bills or lost income may remain. 
4. UIM coverage steps in: Your underinsured motorist coverage helps pay the remaining injury-related costs, up to your policy limits.

For example, if the other driver has $25,000 in coverage but your injuries cost $75,000, their insurance pays $25,000. Then UIM insurance may help cover the remaining $50,000. 

Please note that underinsured and uninsured motorist coverage is often bundled together. Carrying both provides important protection, helping safeguard your vehicle and covering medical expenses if you’re involved in a serious accident with a driver who has little or no insurance.

What Underinsured Motorist Coverage Pays For

Underinsured Motorist Coverage (UIM) helps pay for costs that remain after the at-fault driver’s liability insurance reaches its limit. It focuses on injury-related losses, not vehicle damage. 

In most cases, UIM coverage can help pay for: 

• Medical bills related to your personal injury, including hospital care and follow-up treatment 
• Lost wages if your injuries keep you from working 
• Reduced future income if the injury affects your ability to earn 
• Pain and suffering caused by the accident 
• Funeral expenses in fatal crashes

For you, this coverage exists to handle the shortfall left behind when the other driver’s insurance runs out. It does not replace their policy. Instead, underinsured motorist coverage for you. 

If you want protection for your car when the other driver’s insurance is too low, collision auto insurance is the coverage that applies.

What Underinsured Motorist Coverage Does Not Cover

Underinsured Motorist Coverage (UIM) has clear limits. Knowing what it does not cover helps you avoid confusion after an accident. 

In most cases, UIM coverage does not pay for: 

• Damage to your vehicle. That is usually handled by collision insurance. 
• Accidents you caused yourself. UIM insurance only applies when the other driver is at fault. 
• Injuries when the at-fault driver’s liability insurance has not been fully used. 
• Claims that exceed your UIM coverage limits. 
• Routine medical care not related to the accident. 
• Intentional or criminal acts.

For you, this means underinsured motorist coverage is not all-purpose protection. It exists to cover injury-related gaps when the other driver’s insurance is not enough, nothing more.

Underinsured Motorist Coverage Limits Explained

Underinsured Motorist Coverage (UIM) limits control how much your policy can pay after the other driver’s liability insurance is used up. These limits matter because they cap your protection. 

UIM limits are usually shown as two numbers, such as $100,000 / $300,000. The first number is the maximum paid for one injured person. The second is the total paid for everyone injured in the same accident. 

Here’s how to read them: 

• Per person limit: The most you can receive for one person’s injuries 
• Per accident limit: The maximum paid for all injuries combined

UIM only pays up to your chosen limits. If your losses exceed them, the remaining costs are yours. That’s why higher limits provide stronger protection when injuries are serious.

When Does Underinsured Motorist Coverage Apply?

Underinsured Motorist Coverage (UIM) applies only after a few conditions are met. It does not activate right away. 

First, the other driver must be at fault and have liability insurance. Next, their insurer must pay up to the policy limit. Only then can UIM coverage step in. If there are remaining injury-related costs after those limits are exhausted, UIM may help cover the gap. 

UIM applies in situations like these: 

• The at-fault driver has insurance, but it is not enough to cover your injuries 
• Medical bills and lost income exceed the other driver’s limits 
• The other insurer has completed payment under its policy

For you, the key point is timing. Underinsured motorist coverage applies last, not first, and only when the other driver’s insurance runs out.

How Much Underinsured Motorist Coverage Should You Carry?

You should carry enough underinsured motorist coverage (UIM) to protect you after a serious injury. A simple rule works for most drivers. Match your UIM coverage limits to your bodily injury liability limits. 

Why this matters is straightforward. Medical bills and lost income can exceed state minimums quickly. Once the at-fault driver’s insurance runs out, UIM coverage becomes your backup. 

For most drivers, consider this approach: 

• Match UIM limits to your liability limits for balanced protection 
• Choose higher limits if you have savings, a home, or dependents 
• Avoid minimum limits when you can, since they rarely cover major injuries

Higher UIM coverage usually adds a small cost. However, it can prevent large out-of-pocket expenses when the other driver’s insurance is not enough.

Is Underinsured Motorist Coverage Worth It?

Yes, for most drivers, Underinsured Motorist Coverage (UIM) is worth it. 

Many drivers carry only minimum liability insurance. That coverage often runs out fast after a serious accident. When it does, UIM coverage can protect you from paying medical bills and lost income out of pocket. 

The cost is usually modest. However, the financial risk without it can be high. One serious injury can exceed the other driver’s limits in days, not years. 

For you, UIM insurance is about balance. If you think your liability limits are reasonable to protect others, carrying similar limits to protect yourself makes sense. 

Bottom Line: Do You Need Underinsured Motorist Coverage

Yes, most drivers do. Underinsured Motorist Coverage (UIM) protects you when the at-fault driver has insurance, but not enough to cover your injuries. Since minimum limits often fall short, this coverage helps prevent high out-of-pocket costs. For you, it’s a simple way to guard against other drivers’ low insurance choices. 

Learn More: Types of car insurance coverage

Underinsured Motorist Coverage FAQs

What is an example of underinsured? 

An example is when the at-fault driver has liability insurance, but their limits are too low. For instance, if their policy pays $25,000 and your injuries cost $75,000, the driver is underinsured. Underinsured Motorist Coverage (UIM) can help cover the remaining gap of $50,000. 

How much can I get from an underinsured motorist claim? 

You can receive up to your UIM coverage limits, minus what the at-fault driver’s insurance already paid. The exact amount depends on your policy limits and the severity of your injuries. 

Why is underinsurance bad? 

Underinsurance is risky because minimum coverage often fails to cover real medical and income losses after a serious accident. When the other driver’s insurance runs out, the remaining costs can fall on you without underinsured motorist coverage in place.