Picture this: you're sitting at a red light when someone rear-ends you hard enough to give you whiplash and total your car. You exchange information, file a claim with their insurance company, and then get the devastating news—they only carry $25,000 in liability coverage, but your medical bills alone are already at $40,000. This is exactly when underinsured motorist coverage becomes your financial lifeline.
Here's the thing that surprises most people: one in three drivers on American roads right now is either uninsured or underinsured. That's 33.4% of the cars around you—and that percentage has been climbing over the past several years. Underinsured motorist coverage (UIM) protects you when someone else causes an accident but doesn't have enough insurance to fully compensate you for your injuries and damages.
What Is Underinsured Motorist Coverage?
Underinsured motorist coverage is an optional add-on to your auto insurance policy that kicks in when the other driver is at fault but their liability coverage isn't high enough to cover your expenses. It's different from uninsured motorist coverage, which protects you when the at-fault driver has no insurance at all or in hit-and-run situations.
UIM coverage typically comes in two forms: bodily injury coverage and property damage coverage. Bodily injury coverage pays for medical expenses, lost wages, pain and suffering, and other injury-related costs for you and your passengers. Property damage coverage helps repair or replace your vehicle when the other driver's property damage liability falls short. In many states, these coverages are bundled together with uninsured motorist protection as UM/UIM coverage.
The coverage works by filling the gap between what the at-fault driver's insurance pays and what you actually need. For example, if you have $100,000 in UIM coverage and the other driver only carries $25,000 in liability, your UIM policy could provide up to $75,000 in additional coverage for your injuries and damages.
Why Underinsured Motorist Coverage Matters More Than Ever
The statistics are sobering. In 2023, more than one in six drivers—18%—were underinsured. Combined with the 15.4% who carry no insurance at all, that means roughly one in three vehicles sharing the road with you lacks adequate coverage. States like Mississippi see uninsured rates as high as 28.2%, while even low-rate states like Maine still have 5.7% of drivers uninsured.
Medical costs have also skyrocketed. A serious car accident can easily generate six-figure medical bills when you factor in emergency room visits, surgery, physical therapy, and lost income during recovery. Meanwhile, many drivers still carry only their state's minimum liability limits—often just $25,000 or $30,000 per person. That might have been adequate decades ago, but it's woefully insufficient for today's healthcare costs.
Without UIM coverage, you'd be left trying to collect the shortfall directly from the at-fault driver—and most people who carry minimal insurance don't have substantial assets you can pursue. You could end up facing bankruptcy-level medical debt through no fault of your own, all because someone else made a bad decision about their coverage limits.
How UIM Coverage Works in Practice
When you're in an accident, you'll first file a claim with the at-fault driver's insurance company. Their liability coverage will pay up to their policy limits. If your damages exceed those limits, that's when your UIM coverage takes over—but only after you've exhausted the other driver's coverage first.
Let's walk through a real-world example. You're injured in an accident where the other driver is clearly at fault. Your total damages are $85,000: $60,000 in medical bills, $15,000 in lost wages, and $10,000 in pain and suffering. The at-fault driver carries only $30,000 in bodily injury liability—their state's minimum requirement. Their insurance pays you the full $30,000, but you're still $55,000 short.
If you have $100,000 in UIM coverage, your own insurance company will pay you the remaining $55,000, making you whole. However, if you only carried $50,000 in UIM coverage, you'd receive $50,000 from your policy and would still be out $5,000. This is why insurance experts often recommend carrying UIM limits that match or exceed your liability coverage limits.
It's important to note that UIM claims can take time to settle. You'll need to provide documentation of your injuries, treatment, and financial losses. Your insurance company may request medical records, bills, and proof of lost income. In some cases, if there's a dispute about the settlement amount, you might need to go through arbitration or even litigation—though you'd be doing this with your own insurance company rather than the at-fault driver.
What Does UIM Coverage Cost?
Here's the good news: UIM coverage is surprisingly affordable. The median cost for uninsured motorist bodily injury coverage is just $50 per year, while property damage coverage typically costs even less at around $38 annually. For roughly the price of a nice dinner out, you can protect yourself against potentially catastrophic financial losses.
The exact cost varies based on several factors: where you live, how much coverage you choose, your driving record, and how it's bundled with your other coverages. States with higher rates of uninsured and underinsured drivers may charge slightly more, but the coverage remains one of the most cost-effective protections you can buy.
When you consider that typical UIM claim payouts range from $10,000 to $100,000, with severe cases exceeding $250,000, spending $50 to $100 per year for this protection is a no-brainer. It's one of those insurance coverages where the peace of mind far outweighs the premium cost.
State Requirements and Coverage Options
About half of U.S. states require some form of UM/UIM coverage. Twenty states and the District of Columbia mandate it, though the specific requirements vary significantly. Some states require both uninsured and underinsured coverage, while others only require uninsured motorist protection. A few states only require coverage for bodily injury, leaving property damage as optional.
For example, Illinois requires both uninsured and underinsured motorist coverage, while Massachusetts and South Carolina only mandate uninsured coverage. Kansas requires minimum UIM limits of $25,000 per person and $50,000 per accident. North Carolina bundles liability and uninsured motorist coverage together as a package deal.
Even if your state doesn't require UIM coverage, you can almost always purchase it as an optional add-on. Given the statistics on underinsured drivers and the low cost of the coverage, it's worth adding to your policy regardless of whether it's legally required. Think of it as protecting yourself from other people's poor insurance decisions.
How to Get Started with UIM Coverage
Adding underinsured motorist coverage to your auto insurance policy is straightforward. Start by checking your current policy—you might already have it and not realize it, especially if you live in a state where it's mandatory. Look for the UM/UIM section of your declarations page to see your current coverage limits.
If you don't have UIM coverage or your limits are low, call your insurance agent or log into your online account to request a quote. Most insurers will let you choose coverage limits that match your liability limits, which is what most experts recommend. For example, if you carry $100,000/$300,000 in liability coverage, consider the same limits for your UIM coverage.
Don't make the mistake of thinking, 'It won't happen to me.' With one in three drivers uninsured or underinsured, the odds are higher than you think. For less than the cost of a monthly streaming subscription, you can protect yourself and your family from financial devastation following an accident that wasn't your fault. It's one of the smartest insurance decisions you can make—and one you'll be incredibly grateful for if you ever need to use it.
