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The driver who hit you carries the state minimum liability limits. Your medical bills alone are triple that number. His insurer pays its maximum, which covers a fraction of your losses, and then everyone looks at you. This is the exact situation underinsured motorist coverage exists for, and it is one of the cheapest protections on your policy.
What underinsured motorist coverage pays
Underinsured motorist coverage, usually shortened to UIM, pays for your injuries when the at-fault driver’s liability limits are too low to cover your damages. It covers medical bills, lost wages, and pain and suffering up to your own UIM limits. Think of it as your liability coverage working in reverse: instead of protecting your assets when you cause a crash, it protects your recovery when someone else does.
Many states also offer underinsured motorist property damage, which covers your car when the at-fault driver’s property damage limit runs out. In states without it, your collision coverage fills that role, minus your deductible.
Underinsured vs uninsured: the difference matters
Uninsured motorist coverage applies when the at-fault driver has no insurance at all, or in a hit-and-run. Underinsured applies when the driver has insurance, just not enough. They are often sold together as UM/UIM, and many states require insurers to offer both. The distinction matters at claim time because the proof is different: for UIM you must show the other driver’s limits are exhausted before your coverage responds.
Some states reduce your UIM payout by what the at-fault driver paid, called a setoff. If you carry $100,000 in UIM and the other driver pays $50,000, a setoff state gives you $50,000 more, for a total of $100,000. Other states stack the coverages, giving you the full $100,000 on top of the $50,000. Your state’s rule changes the real value of the coverage, so it is worth knowing which one you live under.
How a UIM claim actually works
The claim has two stages. First, the at-fault driver’s insurer pays up to its limits. Your insurer will want proof of those limits and proof they are exhausted, usually a copy of the other driver’s declarations page and the settlement breakdown. Only then does your UIM coverage engage. This means UIM claims take longer than standard claims. There is no shortcut around the first stage.
Your own insurer then steps into an adversarial role it does not play in your other claims. In a UIM claim, your insurer evaluates your damages the way the other driver’s insurer would, because every dollar it agrees you are owed comes from its own pocket. Document everything as if you were dealing with a hostile insurer: medical records, wage loss verification, photos, witness statements. Some policyholders hire an attorney for UIM claims once the numbers get serious, and that is a reasonable call.
How much UIM to carry
The standard advice is to match your UIM limits to your liability limits. If you carry $100,000 per person and $300,000 per accident in liability, carry the same in UM/UIM. The logic is simple: the coverage protects your household’s earning power and assets, which are the same things your liability limits protect against. Raising UIM from state minimums to 100/300 typically adds a modest amount to the premium, far less than the equivalent increase in liability.
Drivers with significant assets, high incomes, or regular passengers should think harder about this coverage than about almost any other line on the policy. A serious injury caused by a minimum-limits driver is one of the few scenarios where an insured, careful driver ends up financially exposed through no fault of their own.
Pair this with the basics on the uninsured side: uninsured motorist coverage explained and do you actually need uninsured motorist coverage.
