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Underinsured motorist coverage protects you when the at-fault driver’s insurance isn’t enough to pay your bills. According to the Insurance Research Council, one in three drivers — about 33.4% — were either uninsured or underinsured in 2023.
That’s a 10 percentage point increase since 2017. Many states still allow minimum liability limits as low as $25,000 per person. However, the average bodily injury claim now exceeds $28,000. As a result, even drivers who carry insurance may not have enough to cover your injuries. Underinsured motorist coverage steps in to fill that dangerous gap between what the other driver can pay and what your injuries actually cost.
How Underinsured Motorist Coverage Works
Underinsured motorist coverage pays the difference when the at-fault driver’s policy falls short. For example, imagine another driver causes $80,000 in injuries. They only carry $25,000 in liability coverage. Your underinsured motorist coverage would help pay the remaining $55,000, up to your policy limit.
There are two types of UIM systems across states. In “difference in limits” states, your UIM policy only pays the gap between the at-fault driver’s coverage and your UIM limit. In “add-on” states, your UIM limit stacks on top of the at-fault driver’s payment. The add-on method typically provides more total coverage. Check with your state’s Department of Insurance to learn which system applies to you.
Why State Minimums Leave You Exposed
Most states set liability minimums around $25,000 per person and $50,000 per accident. Some states recently raised their floors. California moved to 30/60/15 in 2025. North Carolina jumped to 50/100/50. However, these increases still fall short of real-world costs.
The numbers tell the story clearly. According to the Insurance Information Institute, the average liability payout reaches $18,417. A single emergency room visit costs around $3,300. Inpatient hospitalization averages $57,000 for stays over four days. Serious injuries like fractures or traumatic brain injuries can exceed $100,000. In Mississippi alone, 67% of accident claims exceeded minimum coverage limits in 2024.
Here’s how typical state minimums compare to actual costs:
| Scenario | Typical Cost | State Minimum (25/50) | Gap |
|---|---|---|---|
| Average bodily injury claim | $28,278 | $25,000 | $3,278 |
| ER visit + follow-up care | $15,000 | $25,000 | Covered |
| Hospital stay (4+ days) | $57,000 | $25,000 | $32,000 |
| Serious injury (TBI, fractures) | $100,000+ | $25,000 | $75,000+ |
What Underinsured Motorist Coverage Costs and Who Needs It
Underinsured motorist coverage is surprisingly affordable. The average cost runs about $199 per year. For $25,000/$50,000 limits, expect to pay between $33 and $76 annually. Higher limits of $100,000/$300,000 cost between $86 and $134 per year. In most cases, increasing your UIM limits adds far less to your premium than other coverage types.
Currently, about 22 states require some form of uninsured or underinsured motorist coverage. States like Connecticut, Maryland, Minnesota, Oregon, and Virginia mandate UIM specifically. However, even if your state doesn’t require it, experts strongly recommend carrying it. The National Association of Insurance Commissioners suggests matching your UIM limits to your liability limits. A 100/300/100 policy typically costs only about $168 more per year than minimum coverage.
How to Get the Right Underinsured Motorist Coverage
Start by reviewing your current policy declarations page. Look for “UIM” or “underinsured motorist” in your coverage list. If it’s missing or set at minimum levels, contact your insurer. Request quotes for 100/300 UIM limits at minimum.
Consider these steps when choosing your coverage level. First, add up your household’s total annual income. Your UIM limits should protect at least two years of earnings. Second, check whether your state allows UIM stacking. Stacking lets you combine limits from multiple vehicles on one policy. Third, review your health insurance deductibles. Higher medical deductibles mean you need more underinsured motorist coverage to avoid out-of-pocket costs.
For example, if you earn $60,000 per year and have a $5,000 health insurance deductible, carrying at least $100,000 in underinsured motorist coverage makes financial sense. The cost difference between minimum and adequate UIM limits is typically under $100 per year. That’s less than $9 per month for significantly better protection.
Frequently Asked Questions
What is the difference between uninsured and underinsured motorist coverage?
Uninsured motorist coverage applies when the at-fault driver has no insurance at all. Underinsured motorist coverage kicks in when the at-fault driver has insurance, but their limits are too low to cover your damages. In most cases, insurers bundle both coverages together under one premium.
Does underinsured motorist coverage pay for property damage?
It depends on your state. Some states include property damage in UIM coverage. However, many states limit underinsured motorist coverage to bodily injury only. Typically, collision coverage handles vehicle damage regardless of the other driver’s insurance status.
Can I use underinsured motorist coverage if I’m a passenger?
Yes, in most cases. If you’re a passenger in someone else’s car, their UIM policy may cover you first. As a result, your own underinsured motorist coverage can serve as secondary protection. This applies whether you’re riding in a friend’s car, a rideshare, or a family member’s vehicle.
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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 April 2026. If you notice any outdated information, please contact us.