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What Is Underinsured Motorist Coverage (UIM)?
Let me explain underinsured motorist coverage—it's a form of auto insurance that safeguards you if you're in an accident caused by someone whose insurance doesn't fully cover the damages. If the at-fault driver's policy limit is less than your repair costs or medical bills, your UIM coverage steps in to handle the difference, up to your policy's limits.
Keep in mind that the exact definition of 'underinsured' and how this coverage operates can differ from state to state. In some places, it's mandatory, while in others, you can add it as an endorsement to your existing car insurance policy.
Remember, this is not the same as uninsured motorist coverage, which protects you when the at-fault driver has no insurance whatsoever.
Key Takeaways
- Underinsured motorist coverage offers protection when the at-fault driver's insurance isn't enough to cover all your damages from an accident.
- It's required for drivers in certain states, but in others, it's an optional add-on to your auto insurance policy.
- Don't confuse it with uninsured motorist coverage, which kicks in if the at-fault driver lacks any insurance.
How Underinsured Motorist Coverage Works
Imagine you're in a car accident that's not your fault—you exchange details, document the damage, and file a claim. But then you learn the other driver's liability coverage is only the bare minimum, and it won't cover your full repair costs. That's where your underinsured motorist coverage activates, paying the excess up to your policy limit.
This coverage usually breaks down into two components: bodily injury, which handles medical expenses and possibly lost wages, and property damage, which covers repairing or replacing your vehicle. However, in some states, only the bodily injury part is offered.
One key point—you can only claim for the actual costs directly resulting from the accident, nothing more.
Benefits of Underinsured Motorist Coverage
Every state except New Hampshire requires liability insurance, which covers damages if you're at fault, and Virginia allows opting out with a $500 annual fee. But state minimums often fall short for serious accidents, leaving gaps in covering repairs or medical recovery.
This is why underinsured motorist coverage is valuable—if the at-fault driver lacks sufficient insurance, your UIM policy covers the shortfall, up to your limits. It's a straightforward way to protect yourself financially.
Here's a quick note: In some states and with certain insurers, you can 'stack' UIM bodily injury limits if you insure multiple vehicles. For instance, two vehicles each with $35,000 limits could combine to $70,000 for better protection.
Where Is Underinsured Motorist Coverage Required?
You need to know if UIM is mandatory where you live. It's required in states like Connecticut, Kansas, Maine, Maryland, Minnesota, Nebraska, North Carolina, North Dakota, Oregon, South Dakota, and Vermont.
In New Hampshire and Virginia, it's required if you buy car insurance at all, and in Rhode Island if your liability exceeds the minimum. Illinois mandates it if your uninsured motorist limit is above the state minimum, and New Jersey requires it for standard policies but not basic ones.
What Is Covered by Underinsured Motorist Coverage?
As I mentioned, UIM typically has two parts: bodily injury for medical bills and potential lost wages, and property damage for vehicle repairs or replacement. These apply only to costs exceeding the at-fault driver's insurance limits.
But availability varies—some states offer only bodily injury coverage. If you're unsure about your state's rules, check with your department of motor vehicles or insurance agent.
Does Underinsured Motorist Insurance Cover Hit-and-Runs?
No, UIM doesn't cover hit-and-run accidents because it requires an identified driver with insufficient insurance. Hit-and-runs are treated as uninsured motorist scenarios, so uninsured motorist coverage usually applies, and sometimes collision coverage is needed too. Consult your agent if you're uncertain.
The Bottom Line
In summary, underinsured motorist coverage is your safeguard against drivers whose insurance can't cover your full medical and property damages after an accident they caused. It's required in select states and optional elsewhere as a policy add-on—consider it if you want that extra layer of protection.
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