Table of Contents
- Uninsured vs Underinsured Motorist Coverage: The Key Differences
- How Underinsured Motorist Coverage Pays Out and What It Costs
- State Requirements and Stacking Rules
- How to Choose the Right Underinsured Motorist Limits
- What to Do After a Crash With an Uninsured or Underinsured Driver
- Frequently Asked Questions
Underinsured motorist coverage and uninsured motorist coverage protect you when the other driver can’t pay for the damage they caused. Many drivers think these are the same thing. They are not. Uninsured motorist (UM) coverage pays when the at-fault driver has no insurance at all. Underinsured motorist (UIM) coverage pays when the at-fault driver has insurance, but not enough to cover your losses.
The Insurance Research Council (IRC) estimates that about one in seven U.S. drivers is uninsured. Many more carry only their state’s minimum limits. As a result, a serious crash can easily leave you with bills the other driver’s policy won’t cover. Knowing how underinsured motorist coverage differs from UM coverage helps you avoid a costly gap.
Uninsured vs Underinsured Motorist Coverage: The Key Differences
Both coverages kick in when the at-fault driver can’t make you whole. However, they respond to different situations. UM coverage applies when the other driver has no liability insurance. It typically also applies to hit-and-run crashes where the driver is never identified. In some states, hit-and-run property damage is limited or excluded, so check your policy wording.
Underinsured motorist coverage applies when the at-fault driver has a policy, but its limits are too low. For example, say a driver carries $25,000 in bodily injury liability per person. Your medical bills and lost wages total $70,000. Their insurer pays $25,000. Your UIM coverage can then help with the remaining $45,000, up to your own limits.
Both coverages usually come in two parts. Bodily injury (UMBI/UIMBI) pays for medical bills, lost wages, and pain and suffering for you and your passengers. Property damage (UMPD/UIMPD) pays to repair your car. UMPD is not offered in every state. In some states it carries a deductible, often around $250.
| Feature | Uninsured Motorist (UM) | Underinsured Motorist (UIM) |
|---|---|---|
| When it applies | At-fault driver has no insurance | At-fault driver’s limits are too low |
| Hit-and-run | Usually covered (bodily injury) | Not applicable |
| Pays for | Medical bills, lost wages, pain and suffering, sometimes car repairs | The gap between your losses and the other driver’s limits |
| Required? | Required in roughly 20 states plus D.C. | Required in fewer states |
How Underinsured Motorist Coverage Pays Out and What It Costs
States use two main methods to calculate underinsured motorist payouts. The difference matters a lot. Under the “limits” or “gap” method, your UIM limit is reduced by the at-fault driver’s limit. Under the “damages” or “excess” method, your UIM coverage stacks on top of the other driver’s payment.
For example, assume you carry $100,000 in UIM coverage. The at-fault driver has $25,000 in liability coverage. Your damages total $150,000. Under the gap method, your insurer pays up to $75,000. That’s your $100,000 limit minus their $25,000. Under the excess method, your insurer could pay the full $100,000. In that case, you’d recover $125,000 in total. Your state’s rules decide which method applies.
State minimums make this coverage important. Many states still require only $25,000 per person in bodily injury liability. Some require even less. According to the Insurance Information Institute (III), the average bodily injury liability claim exceeded $26,000 in 2022. Hospital stays and surgery can cost far more. As a result, even an “insured” driver can leave you with a large unpaid balance.
The good news is that UM/UIM coverage is usually affordable. In most cases, it adds a modest amount to your annual premium. Many drivers pay roughly $100 to $200 per year for meaningful limits. Your actual price depends on your state, driving record, and chosen limits. Raising limits from state minimum to $100,000/$300,000 often costs less than drivers expect.
| Scenario | Your Damages | At-Fault Driver Pays | Gap You Face Without UIM |
|---|---|---|---|
| Minor injury | $15,000 | $15,000 | $0 |
| Moderate injury | $60,000 | $25,000 | $35,000 |
| Serious injury | $250,000 | $50,000 | $200,000 |
State Requirements and Stacking Rules
Rules vary widely by state. Roughly 20 states and the District of Columbia require UM coverage. A smaller group also requires underinsured motorist coverage. Other states require insurers to offer it. In those states, you must typically reject it in writing if you don’t want it. The NAIC recommends reviewing your state insurance department’s website for local rules.
Some states allow “stacking.” Stacking lets you combine UM/UIM limits across multiple vehicles. For example, if you insure three cars with $50,000 UIM each, stacking could give you up to $150,000. Stacked coverage typically costs more. However, it can be valuable for multi-car households. Many states ban or limit stacking, so ask your agent.
No-fault states add another layer. In these states, your personal injury protection (PIP) pays first for medical bills. However, PIP limits are often low. UIM coverage can then help with costs beyond PIP, especially for serious injuries that meet your state’s lawsuit threshold.
How to Choose the Right Underinsured Motorist Limits
Start by checking your current declarations page. Look for lines labeled UM, UIM, or UM/UIM. Note the limits, such as 25/50 or 100/300. The first number is the per-person limit. The second is the per-accident limit. If you see “rejected” or nothing at all, you have a gap.
Next, match your underinsured motorist limits to your liability limits. Many experts recommend this as a baseline. If you carry $100,000/$300,000 in liability, carry the same in UM/UIM. In many states, insurers won’t let you buy UM/UIM limits higher than your liability limits anyway.
Then consider your health insurance and income. Health insurance may cover medical bills. However, it won’t pay for lost wages or pain and suffering. It may also seek repayment from any settlement. If you have a high income or few savings, higher limits make sense. Disability coverage through work can help, but it typically replaces only 60% of income.
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Finally, consider an umbrella policy. Some umbrella policies can include UM/UIM coverage, though many do not by default. Ask specifically before you buy. This option can add $1 million or more in protection at a relatively low cost.
What to Do After a Crash With an Uninsured or Underinsured Driver
Act quickly after any accident. First, call the police and get a report. This is critical for hit-and-run claims. Many policies require a police report within 24 hours for hit-and-run coverage. Get the other driver’s name, insurer, and policy number if possible.
Second, notify your own insurer right away. Most policies require prompt notice. For an underinsured motorist claim, you usually need your insurer’s written consent before settling with the other driver’s company. Settling without consent can void your UIM claim. This step trips up many drivers.
Third, document everything. Keep medical records, bills, receipts, and proof of lost wages. Take photos of your injuries and your car. Typically, the stronger your records, the smoother your claim. If injuries are serious, consult a personal injury attorney. Remember that UM/UIM claims put you in a negotiation with your own insurer.
Frequently Asked Questions
Do I need underinsured motorist coverage if I have health insurance?
In most cases, yes. Health insurance covers medical bills, but not lost wages or pain and suffering. Underinsured motorist coverage also protects your passengers, who may lack good health coverage.
Does uninsured motorist coverage cover hit-and-run accidents?
Typically, yes, for bodily injury. However, property damage from hit-and-runs may be excluded or limited in some states. You usually must report the crash to police promptly.
Will filing an uninsured or underinsured motorist claim raise my rates?
Usually not, since you were not at fault. Many states prohibit rate increases for not-at-fault claims. However, rules vary, so ask your insurer before you file an underinsured motorist claim.
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Official Sources & Resources
For verified information on auto insurance regulations and consumer protection:
- NAIC (National Association of Insurance Commissioners): naic.org
- Insurance Information Institute: iii.org
- Federal Trade Commission — Auto Insurance: consumer.ftc.gov
- USA.gov — Car Insurance: usa.gov/car-insurance
Content last reviewed November 2026. If you notice any outdated information, please contact us.