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Underinsured Motorist Coverage


Underinsured Motorist Coverage is a type of auto insurance policy that protects the policyholder and passengers in an accident involving a motorist whose liability limits are insufficient to cover the expenses of the damages and injuries incurred. This coverage helps pay the difference between the at-fault driver’s insurance limit and the total cost of the damages and medical expenses. Essentially, it provides financial assistance when the liable party’s insurance coverage is inadequate to compensate for the losses sustained in the accident.


The phonetic spelling of “Underinsured Motorist Coverage” is:ʌndərˈɪnʃʊərəd ˈmoʊtərɪst ˈkʌvərɪdʒ

Key Takeaways

  1. Underinsured Motorist Coverage provides protection when the at-fault driver has inadequate insurance to cover your expenses.
  2. Included expenses in this coverage are medical bills, lost wages, and property damage.
  3. It is important to know the coverage limits in your policy to ensure you have adequate protection in case of an accident with an underinsured driver.


Underinsured Motorist Coverage (UIM) is important because it offers financial protection to drivers in the event they are involved in an accident caused by another motorist with insufficient or inadequate insurance coverage to cover the damages incurred. UIM coverage helps close the gap between the at-fault party’s insurance limits and the actual costs of the injuries or damages you may suffer in an accident. This can prove crucial in covering medical expenses, lost income, or property damage, ensuring that you are adequately compensated for any losses sustained, regardless of the other party’s insurance capabilities. By having UIM coverage in place, drivers can safeguard their financial well-being and minimize potential financial strain stemming from an accident involving an at-fault party with inadequate insurance.


Underinsured Motorist Coverage (UIM) serves a crucial purpose in protecting drivers and their finances in the event of a motor vehicle accident where the at-fault driver’s insurance coverage is insufficient to cover the incurred damages and medical expenses. Even when drivers have insurance, a significant number of them choose the minimum required liability insurance, which may not be adequate to cover the full extent of losses. In such situations, UIM coverage steps in to provide the necessary financial support, preventing the injured party from bearing an unjust financial burden. Underinsured Motorist Coverage is used by policyholders to supplement the potential financial gap that arises in the aftermath of an accident caused by an underinsured driver. UIM coverage typically pays for medical expenses, lost wages, and other damages resulting from the accident, up to the limits specified in the policy. This additional layer of protection significantly reduces the financial repercussions for the insured party and can also extend to cover passengers in their vehicle at the time of the accident. By including Underinsured Motorist Coverage in their policies, the insured can have peace of mind knowing they are better safeguarded from the financial risks posed by insufficiently insured drivers.


Underinsured motorist coverage is a type of auto insurance that protects drivers when they are involved in an accident with another driver who has insufficient insurance to cover the damages or injuries. Here are three real-world examples of when this coverage can come into play: Example 1: You’re driving through an intersection when another driver runs a red light and hits your car. The damages to your vehicle and the cost of your medical expenses total $50,000. The at-fault driver has an insurance policy with a bodily injury liability coverage limit of $25,000. In this case, your underinsured motorist coverage would help cover the remaining $25,000 of your expenses, assuming you have a coverage limit of at least $50,000. Example 2: You’re rear-ended on the highway, resulting in significant damage to your car and injuries to you and your passengers. The driver at fault only has the minimum required insurance in your state, which doesn’t fully cover the costs of the accident. Your underinsured motorist coverage steps in to help pay for the remaining expenses, such as medical bills, lost wages, and car repairs, up to your policy limits. Example 3: You’re a pedestrian who’s hit by a car at a crosswalk. The driver is found to be at fault, but their insurance coverage is not sufficient to cover your medical expenses, lost wages, and pain and suffering. Your own underinsured motorist coverage, if you have it as part of your car insurance policy, will help cover these additional costs up to your policy limits.

Frequently Asked Questions(FAQ)

What is Underinsured Motorist Coverage?
Underinsured Motorist Coverage (UIM) is an optional auto insurance coverage that protects you if you’re involved in an accident with a driver who carries insufficient insurance to cover the damages they cause. In such cases, UIM will pay the difference between your policy limits and the other driver’s insurance coverage up to the limits you’ve selected on your UIM coverage.
Why is having Underinsured Motorist Coverage important?
Underinsured Motorist Coverage is important because it provides you with additional protection in scenarios where the at-fault party’s insurance is not sufficient to cover your damages. This ensures you are not left with large out-of-pocket expenses due to someone else’s negligence.
How does Underinsured Motorist Coverage work?
If you’re involved in an accident with an underinsured motorist, you will first file a claim with the at-fault driver’s insurance company. If their coverage limit is not enough to cover your damages, you would then file a claim with your own insurance company under your UIM coverage to recover the remaining damages up to your policy limits.
Is Underinsured Motorist Coverage required?
UIM coverage is not mandatory in all states, but some do require it. It is essential to check your state’s insurance regulations to determine if UIM coverage is required or optional. Even if not mandated, it is usually highly recommended to include UIM in your auto insurance policy.
How is Underinsured Motorist Coverage different from Uninsured Motorist Coverage?
Uninsured Motorist Coverage (UM) protects you in situations where you’re in an accident with a driver who has no insurance at all, whereas Underinsured Motorist Coverage (UIM) applies when the at-fault driver’s insurance coverage is insufficient to cover your damages.
How do I determine an appropriate level of Underinsured Motorist Coverage?
When choosing your UIM coverage limits, consider the potential costs associated with an accident, including medical expenses, lost income, and property damage. It is essential to choose a limit that provides adequate protection in case of a severe accident. Consult with your insurance agent to help determine the appropriate coverage amount for your situation.
Can I still file a claim for an accident if the other driver’s insurance is expired or otherwise invalid?
If you are in an accident and the other driver has an expired or invalid insurance policy, your Uninsured Motorist Coverage (UM) would typically provide protection in this situation. It is crucial to review your policy to ensure that you have adequate coverage, including both UM and UIM.

Related Finance Terms

  • Auto Insurance Policy
  • Bodily Injury Liability
  • Uninsured Motorist Coverage
  • Insurance Claim
  • Personal Injury Protection

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