Abstract:
Nearly one in eight drivers on the road carries no auto insurance at all, and many more carry only bare minimums. This article explains why Uninsured/Underinsured Motorist (UM/UIM) coverage is the most valuable and cost-effective add-on to your policy, stepping in to pay for your medical bills and lost wages when an at-fault driver has zero coverage.
Overview
You can buy strong auto liability insurance, drive carefully, obey traffic laws, and still suffer a major financial loss because another driver made the opposite choices.
Some drivers carry no insurance at all. Others purchase only the smallest liability limits their state permits. If one of those drivers causes a serious crash, the fact that you did nothing wrong does not guarantee that your medical bills, lost income, and other losses will be paid.
That is the problem uninsured and underinsured motorist coverage is designed to solve.
Uninsured motorist coverage, commonly called UM, protects you when an at-fault driver has no usable liability insurance. Underinsured motorist coverage, or UIM, applies when the driver has insurance, but the available limit is too low to cover your damages.
These coverages allow you to turn to your own insurer when the person who hurt you cannot adequately pay.
They are among the most valuable protections available on an auto policy because you cannot control how much insurance other drivers purchase.
How Common Are Uninsured Drivers?
Uninsured driving is not a rare problem.
According to the National Association of Insurance Commissioners, approximately 15.4 percent of motorists were uninsured in 2023. That is roughly one out of every seven drivers nationwide. The rate also varies dramatically by state, ranging from less than 6 percent in some states to more than 28 percent in others. (NAIC Content)
Those numbers count drivers with no insurance. They do not include the many drivers who carry only low state-minimum limits.
That means the practical risk is larger than the uninsured-driver percentage suggests. A driver may hand you a valid insurance card after an accident and still have nowhere near enough coverage to pay for a serious injury.
UM/UIM coverage addresses both problems:
- The driver who has no insurance
- The driver who has insurance, but not enough
What Is Uninsured Motorist Coverage?
Uninsured motorist coverage may pay covered losses when you are injured by a driver who does not have liability insurance.
Depending on your state and policy, UM coverage may apply when:
- An uninsured driver causes an accident
- A hit-and-run driver strikes you and leaves
- A driver’s insurer denies coverage
- The at-fault vehicle was not insured
- The liability policy was cancelled or had lapsed
- The insurer responsible for the claim is insolvent
The exact rules vary by state. Some states require insurers to include UM coverage or offer it to customers, while others allow drivers to reject it.
Uninsured motorist coverage is generally first-party insurance. That means you make a claim against your own policy, even though someone else caused the crash.
The National Association of Insurance Commissioners describes uninsured motorist coverage as protection that pays when the policyholder is injured by an uninsured or hit-and-run driver. (NAIC Content)
What Is Underinsured Motorist Coverage?
Underinsured motorist coverage applies when the person who caused the accident has liability insurance, but the policy limit is not enough to cover your losses.
Suppose another driver runs a red light and causes an accident that leaves you with:
- $50,000 in medical expenses
- $20,000 in lost income
- $10,000 in future treatment
- Additional damages for pain, limitations, or permanent injury
Your total covered damages are determined to be $100,000.
The at-fault driver carries only $25,000 of bodily injury liability coverage.
The other insurer may pay its $25,000 limit. That leaves $75,000 in uncompensated damages.
If you carry adequate underinsured motorist coverage, your own policy may provide additional compensation, subject to your limits, policy language, state law, and any offsets that apply.
Without UIM coverage, you may have to pursue the driver personally. That may not lead to meaningful recovery if the driver has little income or few collectible assets.
An insurance policy cannot create money that the at-fault person does not have. UIM coverage gives you another source of protection.
UM and UIM Are Not the Same as Liability Insurance
Liability insurance and UM/UIM coverage operate in opposite directions.
Your bodily injury liability coverage pays covered claims when you injure someone else and are legally responsible.
Your UM/UIM coverage may pay when someone else injures you but lacks enough insurance.
The basic relationship looks like this:
| Coverage | When it applies | Who it protects |
|---|---|---|
| Bodily injury liability | You cause injuries to someone else | The injured person and your assets |
| Uninsured motorist coverage | An uninsured or hit-and-run driver injures you | You and covered passengers |
| Underinsured motorist coverage | The at-fault driver’s limits are too low | You and covered passengers |
The attached chapter explains that UM/UIM is separate first-party protection within the auto insurance stack. Bodily injury and property damage liability protect against claims arising from harm you cause, while UM/UIM protects you from another driver’s failure to carry adequate insurance.
What Does UM/UIM Bodily Injury Coverage Pay For?
Uninsured and underinsured motorist bodily injury coverage may compensate you for losses similar to those that the at-fault driver’s bodily injury liability policy should have paid.
Depending on the policy and state law, covered damages may include:
- Ambulance transportation
- Emergency medical care
- Hospital bills
- Surgery
- Doctor visits
- Physical therapy
- Prescription medications
- Future medical treatment
- Lost wages
- Reduced future earning capacity
- Pain and suffering
- Permanent impairment
- Funeral expenses
- Certain survivor or wrongful death damages
These claims can involve more than submitting medical bills.
You may need to establish:
- The other driver was legally responsible.
- The driver was uninsured or underinsured.
- Your injuries resulted from the accident.
- The claimed medical care and other damages were reasonable and related.
- The amount of your loss exceeds any available liability coverage.
Even though you are dealing with your own insurance company, the insurer does not automatically accept every part of the claim. It may investigate fault, challenge medical causation, question treatment, or dispute the amount of damages.
UM/UIM coverage gives you a source of recovery. It does not eliminate the need to document your claim.
How Underinsured Motorist Limits Work
UM/UIM limits are often shown in split-limit form, such as:
100/300
That generally means:
- Up to $100,000 for one injured person
- Up to $300,000 for all injured people in one accident
Some policies use a combined single limit instead.
How much UIM coverage is actually available can depend on the state’s method of calculation.
In some jurisdictions, UIM coverage effectively fills the gap between the at-fault driver’s liability limit and your own UIM limit.
For example:
- Your UIM limit: $100,000
- At-fault driver’s bodily injury limit: $25,000
- Potential remaining UIM protection: up to $75,000
Other jurisdictions and policy structures may calculate available coverage differently. Some states allow coverages to be stacked across vehicles or policies, while others restrict stacking.
The practical lesson is not to assume that a $100,000 UIM limit always means that an additional $100,000 will be paid after the other insurer pays.
Ask your agent or insurer:
- Are the at-fault driver’s limits subtracted from mine?
- Can UM/UIM coverage be stacked?
- Does the limit apply per person or per accident?
- Does the policy cover household members?
- Does it apply when I am a passenger, pedestrian, or bicyclist?
- Are there notice or consent requirements?
Why State-Minimum Drivers Create a UIM Risk
A driver can be legally insured and still be dangerously underinsured.
Suppose your state permits a driver to carry only $25,000 in bodily injury liability coverage per person. That may be enough for a minor emergency room visit and follow-up care.
It may not be enough for:
- A broken spine
- A traumatic brain injury
- Major surgery
- A lengthy hospital stay
- Months of rehabilitation
- Permanent disability
- A long absence from work
The at-fault driver’s insurer does not pay unlimited damages. It pays only up to the policy limit for a covered claim.
Once that limit is exhausted, your options may include:
- Pursuing the driver personally
- Making a UIM claim
- Using health insurance
- Using disability benefits
- Paying expenses yourself
- Leaving some losses uncompensated
The chapter describes UM/UIM as particularly valuable because another driver’s lack of insurance is outside your control. It recommends carrying strong limits rather than allowing an uninsured or underinsured driver’s decisions to become your financial problem.
Does UM/UIM Cover a Hit-and-Run Accident?
Uninsured motorist coverage often applies to hit-and-run accidents, but the requirements vary.
A hit-and-run claim may involve:
- Another vehicle striking your car and leaving
- A driver hitting you while you are walking or cycling
- A vehicle forcing you off the road without making contact
- An unknown driver damaging your parked vehicle
- A driver providing false information before disappearing
Some states or policies require physical contact with the unidentified vehicle. Others may allow a no-contact claim if there is independent evidence, such as a witness statement or video recording.
After a hit-and-run accident:
- Move to a safe location.
- Call the police.
- Request an official report.
- Photograph the scene and damage.
- Look for witnesses.
- Save dashcam or surveillance footage.
- Write down everything you remember about the vehicle.
- Notify your insurer promptly.
- Follow the policy’s hit-and-run reporting requirements.
Do not delay because you think the damage or injury is minor. Some injuries become apparent hours or days later, and policies may contain specific notification requirements.
Does UM/UIM Pay for Damage to Your Car?
UM/UIM bodily injury coverage generally focuses on injuries, not damage to your vehicle.
Some states and insurers offer uninsured motorist property damage, often abbreviated UMPD. This coverage may pay for vehicle damage caused by an uninsured driver.
UMPD may have:
- A deductible
- A separate limit
- Requirements that the other driver be identified
- Restrictions on hit-and-run claims
- Different rules from collision coverage
Collision insurance may also pay for damage to your vehicle after a crash, regardless of whether the at-fault driver has insurance. You would generally pay your collision deductible, although your insurer may later attempt to recover the money from the responsible driver.
Do not assume that purchasing UM bodily injury automatically protects your car. Check the declarations page for separate uninsured motorist property damage, collision, or both.
Why Health Insurance Is Not a Substitute
Some drivers reject UM/UIM because they already have health insurance.
Health insurance is valuable, but it does not replace UM/UIM coverage.
Health insurance may pay part of your medical treatment. It generally does not compensate you for:
- Lost wages
- Reduced earning capacity
- Pain and suffering
- Permanent disability
- Replacement services
- All deductibles and coinsurance
- Certain future losses
- Wrongful death damages for surviving family members
Your health insurer may also have a right to reimbursement from an accident settlement under applicable policy terms and law.
UM/UIM is designed to address liability damages arising from the collision. Health insurance primarily pays for eligible medical care.
The two coverages serve different purposes.
A Realistic Underinsured Driver Scenario
Imagine that Priya is stopped at a red light when another driver crashes into the rear of her vehicle.
Priya suffers a back injury and misses several weeks of work. Her losses include:
- $42,000 in medical treatment
- $8,000 in lost wages
- $5,000 in anticipated future care
- Additional damages related to pain and reduced mobility
The other driver has only $25,000 in bodily injury liability coverage.
That insurer offers its policy limit, but the payment does not cover Priya’s full loss.
Fortunately, Priya carries underinsured motorist coverage. After resolving the liability claim and following her own policy’s procedures, she submits a UIM claim for the remaining damages.
The chapter uses a similar consumer scenario to show why UM/UIM matters. The injured driver could not control whether the person who hit her had adequate insurance. Her own coverage protected her from the other driver’s bad financial decision.
Do You Need Uninsured Motorist Coverage?
For most drivers, UM/UIM deserves serious consideration.
Ask yourself:
- Could I cover months of lost income after an accident?
- Would my health insurance cover every medical expense?
- Could I afford deductibles, coinsurance, and future treatment?
- What happens if the at-fault driver has no assets?
- Do I regularly transport family members?
- Would my passengers be protected?
- How common are uninsured drivers in my state?
- What is the cost of raising my UM/UIM limits?
You may be an excellent driver and still need this coverage. UM/UIM does not primarily protect you from your own mistakes. It protects you from drivers whose actions and insurance decisions you cannot control.
How Much UM/UIM Coverage Should You Carry?
A common starting point is to consider UM/UIM limits equal to your bodily injury liability limits.
That creates a sensible symmetry:
- You carry enough liability coverage to protect others when you cause an accident.
- You carry similar protection for yourself when another driver causes one.
For example, if your liability limits are 100/300, consider pricing UM/UIM limits of 100/300 rather than accepting a much smaller amount.
Your decision should account for:
- Your income
- The number of family members on the policy
- Your health insurance deductible
- Your disability coverage
- Your savings
- Your tolerance for financial risk
- The cost of higher limits
- State-specific stacking rules
- Whether you have an umbrella policy that includes UM/UIM
Do not assume your umbrella policy extends uninsured or underinsured motorist protection. Some do, while others exclude it or offer it only by endorsement.
Questions to Ask Your Insurance Company
Before purchasing or renewing your policy, ask:
- Do I have both UM and UIM bodily injury coverage?
- What are my per-person and per-accident limits?
- Does the coverage protect my passengers and household members?
- Does it apply when I am walking, cycling, or riding in someone else’s car?
- How are hit-and-run claims handled?
- Is physical contact required for an unidentified-driver claim?
- Do I have uninsured motorist property damage?
- Can my coverage be stacked?
- Is the at-fault driver’s payment deducted from my UIM limit?
- What would it cost to raise my limits?
Review the actual declarations page rather than relying on phrases such as “full coverage.” Full coverage is not a standard policy definition and does not guarantee that you have UM/UIM.
Watch for Written Rejection Forms
In some states, insurers must offer uninsured or underinsured motorist coverage, but customers may reject it or select lower limits.
That rejection may require a signed form.
Do not sign a UM/UIM rejection merely because it lowers the premium. Make sure you understand the financial risk you are accepting.
Also check older policies. You may have rejected the coverage years ago without remembering, or accepted limits that no longer reflect your income and financial needs.
A coverage decision made when you bought your first car should not remain permanent by accident.
Your Best Defence Against Someone Else’s Bad Policy
Liability insurance protects you when you cause harm. UM/UIM protects you when someone else causes harm but failed to buy enough insurance to pay for it.
That makes uninsured and underinsured motorist coverage fundamentally different from many optional auto coverages.
You can decide whether an older car is worth insuring against physical damage. You can decide whether to buy roadside assistance or rental reimbursement.
You cannot decide whether the driver approaching the intersection has insurance.
Approximately one in seven motorists was uninsured in the latest national estimate, and many insured drivers carry only low legal minimums. (NAIC Content)
Review your declarations page and find your UM/UIM limits. Confirm exactly who is protected, what damages are covered, how hit-and-run claims work, and whether your limits are high enough to handle a serious injury.
The other driver’s cheap policy should not determine whether your family recovers financially after a crash.
