You've been hit by another driver who was clearly at fault. You go to the hospital, rack up $75,000 in medical bills, and miss two months of work. The good news? The other driver has insurance. The bad news? They only carry their state's minimum coverage of $25,000. Who pays the remaining $50,000? Without underinsured motorist coverage, that's on you.
Here's a sobering statistic: in 2023, 18% of American drivers were underinsured. Combined with the 15.4% who have no insurance at all, that means one in three drivers on the road can't fully cover the damage they might cause in a serious accident. This is where underinsured motorist coverage becomes crucial—it's your financial safety net when someone else's insurance falls short.
What Is Underinsured Motorist Coverage?
Underinsured motorist coverage (UIM) protects you when you're in an accident caused by a driver whose insurance isn't enough to cover your medical expenses, lost wages, and other damages. It's different from uninsured motorist coverage—that kicks in when the at-fault driver has zero insurance. UIM fills the gap when they have some insurance, just not enough.
Think of it this way: someone rear-ends you at a red light, causing a serious back injury. Your medical bills total $100,000. The at-fault driver carries the state minimum liability coverage of $30,000 per person. Their insurance pays out their maximum—$30,000—but you're still $70,000 short. If you have underinsured motorist coverage with limits of $100,000, your own policy steps in to cover that $70,000 gap.
This coverage typically includes two components: bodily injury and, in some states, property damage. Bodily injury UIM covers medical expenses, rehabilitation costs, lost income if you can't work, and pain and suffering. Property damage UIM helps repair or replace your vehicle when the at-fault driver's property damage limits aren't sufficient.
When Does Underinsured Motorist Coverage Apply?
Your UIM coverage triggers in specific situations where there's a clear coverage gap. First, another driver must be at fault for the accident—this isn't coverage for accidents you cause. Second, that driver must have liability insurance that's less than your total damages. Third, your damages must exceed their policy limits.
The math matters here. Let's say you have $100,000 in UIM coverage and the at-fault driver has $50,000 in liability coverage. If your damages total $80,000, their insurance pays $50,000 and your UIM coverage pays the remaining $30,000. But if your damages are $150,000, you'd still face a $50,000 gap even after both policies max out—your UIM coverage only pays up to your policy limits minus what the other driver's insurance covered.
Understanding this coverage gap is crucial because many drivers carry only state-required minimums, which can be shockingly low. California's minimum is just $15,000 per person, while Florida's is $10,000. A single ambulance ride and emergency room visit can exceed those amounts, let alone surgery, physical therapy, or months of lost wages.
How Much Underinsured Motorist Coverage Do You Need?
Insurance experts universally recommend one simple rule: match your underinsured motorist limits to your liability coverage limits. If you carry $100,000/$300,000 in liability coverage (that's $100,000 per person and $300,000 per accident), buy the same limits for your UIM coverage. This creates symmetrical protection—you're covered to the same degree whether you cause an accident or someone else does.
At minimum, experts suggest $100,000/$300,000 in UIM coverage, though $250,000/$500,000 is better if you can afford it. Before you worry about cost, here's the good news: this coverage is remarkably affordable. The median cost is only about $50 per year for UIM bodily injury coverage. That's roughly $4 per month for protection that could save you from financial devastation.
When deciding your limits, consider these factors: your assets and savings (which could be at risk in a lawsuit if you're underinsured), your income (how much would losing months of work cost you?), your health insurance deductibles and out-of-pocket maximums, and your family situation (multiple family members injured in one accident could quickly exhaust lower limits). If you have significant assets to protect or a high income, higher limits—or even umbrella insurance—make sense.
State Requirements and Important Variations
Twenty states plus Washington D.C. require you to carry underinsured motorist coverage, though you can typically reject it in writing. Requirements vary: some states mandate specific minimum limits, while others let insurers offer it but allow you to decline. Several states saw changes in 2024-2025—Virginia increased its minimum UIM coverage to $50,000/$100,000 starting January 2025, and North Carolina began requiring UIM coverage on all new and renewed policies starting July 2025.
Even if your state doesn't require UIM coverage, the statistics make a compelling case for buying it anyway. The combined rate of uninsured and underinsured drivers increased by 10 percentage points from 2017 to 2023, reaching 33.4%. This trend continued despite economic improvements, likely because insurance affordability has worsened for many Americans. The risk isn't going away—it's growing.
Some states offer enhanced or stacked UIM coverage options. Enhanced UIM provides broader protection—for example, Maryland's enhanced UIM covers the full amount of your damages up to your policy limit, regardless of what the at-fault driver's insurance pays. Stacked coverage lets you combine limits from multiple vehicles on your policy for greater protection, though it costs more.
How to Get the Right Coverage
Adding underinsured motorist coverage to your auto policy is straightforward. Contact your insurance agent or log into your online account and request UIM coverage that matches your liability limits. Most insurers bundle uninsured and underinsured motorist coverage together—when you buy UM coverage, UIM comes with it automatically.
Review your current policy declarations page to see if you already have this coverage and at what limits. Many people discover they either declined it when they bought their policy (perhaps to save a few dollars) or accepted their state's minimum limits without realizing how inadequate those are. If your coverage is lower than your liability limits, request an increase. The premium difference is typically minimal.
When shopping for auto insurance, don't make decisions based solely on price. The cheapest policy often has the lowest coverage limits, leaving you vulnerable. Compare quotes with identical coverage limits across insurers to find the best value. And remember—the point of insurance isn't to check a legal requirement box. It's to protect your financial future when things go wrong. For less than the cost of a monthly streaming service, underinsured motorist coverage gives you that protection.
