Understanding Uninsured & Underinsured Motorist Coverage

This article will explain the difference between an Uninsured motorist and an Underinsured motorist, along with the implications of their respective coverages. It will also discuss what to look for when buying a UM/UIM policy. 

What is the Difference Between an Uninsured Motorist (UM) and an Underinsured Motorist (UIM)?

An Uninsured Motorist is just that: someone with no auto insurance. Statistics show that 1 out of every 7 drivers (14% of drivers) in the US does not have any insurance. That’s over 45 million uninsured drivers. Alarming as this is, your Uninsured Motorist coverage will step in and act like the other party’s insurer in the event of a collision with someone uninsured. So if the other party was at fault, your insurer will pay you, up to your Uninsured Motorist coverage limit, as if they were the other party’s insurer.

An Underinsured Motorist is someone driving with insufficient levels of liability/property coverage. The Underinsured Motorist coverage comes into play when the other party is at-fault for the accident, and their insurance policy limit isn't high enough to cover everything they’re liable for. Like the Uninsured Motorist coverage, Underinsured Motorist coverage then steps in to act like the other party's insurer to pay for the damages that the other party can't cover, up to your Underinsured Motorist coverage limit. 

Note: UM/UIM coverages need to be endorsed to pay for collision/comprehensive claims. Standard UM/UIM coverage only pay for physical injury on behalf of the uninsured/underinsured motorist.

While an Uninsured Motorist is easily defined, determining if you are an Underinsured Motorist is a hard thing to do until you cause an accident. Determining if you have a sufficient amount of coverage is entirely dependent on the severity of the accident you cause. For example, if you cause a simple fender bender, you might only be liable for a few hundred dollars. That's to fix the bumper and for a chiropractic session for the person you hit. However, a serious accident involving multiple people could easily add up to be hundreds of thousands of dollars! (In many cases, simply being insured for the minimum state liability limits is going to cause you to be an Underinsured driver if you cause an accident*)

What if I Cause an Accident Where I'm Underinsured but the Other Party has Underinsured Motorist coverage?

If they do, their insurance company is going to step in and take care of all of their immediate medical bills on your behalf, since you were driving without proper coverage (at least, 'improper' for the accident you caused). The other party's insurance company will come back and sue you for everything you rightfully owe, however (this is called Subrogation).

Note: In the opposite situation where you're not the one at fault, if your insurer pays you through UM or UIM, your insurer will sue the other party to make them pay for what they owe (Subrogate them).

What Should I Look for When Buying UM/UIM Coverage?

To protect yourself from a hit-and-run or not-at-fault accidents where the other driver doesn't have/doesn't have enough insurance, you'll need UM/UIM coverage. Typically, UM/UIM is sold as a single coverage, however, it often only covers your bodily injury. Make sure UM/UIM for property damage is covered and if not, see if it can be endorsed to the basic UM/UIM coverage.  

A fully endorsed UM/UIM policy is an essential part of your auto insurance. Between the minimum state liability limits for auto insurance being so low and the high number of uninsured drivers on the road, UM/UIM coverage has become a necessity! Make sure to contact your agent to make sure that you're fully covered!