Underinsured Motorist Coverage: Protect Yourself from Accidents 1

Car accidents are unpredictable, often leaving drivers in tricky situations.

Even if you’re a careful driver, there’s no guarantee the other person involved will be adequately insured.

This is where Underinsured Motorist Coverage (UIM) comes in handy. This type of coverage offers a crucial safety net when you’re involved in an accident where the at-fault driver doesn’t have enough insurance to cover your damages. The question isn’t whether you need UIM—it’s understanding why it’s vital for your protection and peace of mind.

What is Underinsured Motorist Coverage?

Underinsured Motorist Coverage is a type of insurance designed to fill the gap when the other driver’s insurance isn’t enough. Let’s break it down: you’re in a car accident, and the at-fault driver has basic liability coverage, but it’s insufficient to cover the total cost of your medical bills, vehicle repairs, or lost wages. In such cases, your UIM coverage steps in to pay the difference.

There are two main types of coverage within this policy:

Bodily Injury Coverage – This pays for medical expenses and lost wages if you’re hurt by a driver with too little insurance.
Property Damage Coverage – This covers damages to your vehicle or other property caused by an underinsured driver.

UIM coverage ensures you’re not left with out-of-pocket costs, giving you financial protection after an accident.

Why Is UIM Coverage Important?

Accidents Happen Frequently
Even with the safest driving habits, you can’t control others on the road. If you’re involved in a crash with someone who has minimal insurance, you could be left covering huge bills. UIM acts as a backup plan for these unforeseen events.
Many Drivers Carry Low Insurance Limits
Unfortunately, not every driver carries sufficient insurance. Some only carry the state minimum, which often doesn’t fully cover serious accidents. In states like California or Texas, minimum liability insurance might be as low as $15,000. That might cover some medical bills, but in a significant accident, it won’t be enough.
Medical Expenses Are Skyrocketing
With rising healthcare costs, an injury from an accident can quickly add up. Surgeries, hospital stays, rehabilitation, and ongoing treatments often exceed the limits of an average insurance policy. UIM helps bridge the gap so that you aren’t financially overwhelmed by the aftermath of a crash.

How Does Underinsured Motorist Coverage Work?

Once you’ve been in an accident, your insurance company will first look at the other driver’s coverage. If their policy doesn’t cover the damages, your UIM policy kicks in to handle the remaining costs. Here’s an example to illustrate how it works:

The at-fault driver has $25,000 in liability coverage.
Your medical expenses total $50,000.
Your UIM coverage covers the remaining $25,000 after the at-fault driver’s insurance has been exhausted.

In most cases, UIM claims are settled directly between you and your insurance company. You may not need to involve the other driver after the initial accident report, simplifying the process.

How Much Underinsured Motorist Coverage Do You Need?

Choosing the right amount of UIM coverage depends on various factors, including:

Your Health Insurance Coverage: If you have excellent health insurance, you might require less bodily injury coverage from UIM. However, if your health insurance has high deductibles or limited coverage, it’s wise to consider higher UIM limits.
The Value of Your Vehicle: If your car is expensive to repair or replace, make sure you have adequate property damage coverage under UIM.
Your Personal Finances: Consider your ability to cover out-of-pocket expenses in a worst-case scenario. If the idea of paying thousands of dollars for injuries or repairs scares you, opt for higher limits.

A good rule of thumb is to match your UIM limits to your liability insurance. This ensures comprehensive coverage for all potential outcomes, giving you peace of mind whether you’re the at-fault driver or the victim of an underinsured one.

The Difference Between Uninsured and Underinsured Motorist Coverage

It’s easy to confuse uninsured motorist coverage (UM) with underinsured motorist coverage, but there’s a key difference. UM protects you if you’re hit by a driver who doesn’t have any insurance at all, while UIM protects you when the other driver has insurance, but not enough to cover the full cost of the accident. Ideally, you should have both types of coverage since either situation can leave you vulnerable.