Underinsured Motorist Coverage Explained

If you’re in a car accident and another motorist is at fault, their insurance will usually cover your medical bills and repairs. What if the driver does not have adequate insurance to cover all of your expenses? This is where underinsured motorist coverage can help.

What is underinsured motorist coverage?

Underinsured motorist coverage is a sort of auto insurance that compensates if the driver who caused the collision does not have enough insurance to cover your injuries or vehicle damage.

It is frequently sold alongside uninsured motorist coverage, which is similar but compensates when the at-fault driver does not have auto insurance.

Nearly a dozen states require underinsured motorist coverage, while many others make it voluntary.

How does underinsured motorist coverage work?

Underinsured motorists are drivers who have liability insurance but not enough to cover all of the harm they have caused. Liability insurance is a component of an auto policy that covers vehicle repairs and injury to others in the event of a collision for which you are at fault. If an at-fault motorist does not have adequate liability coverage, other injured drivers and passengers may be forced to pay the remaining expenditures.

Underinsured motorist coverage prevents this by covering the gap between the at-fault driver’s policy limit and the entire cost of the damage they caused. 

Underinsured motorist coverage is especially valuable if you are hit by someone who only carries the minimum necessary car insurance. In some areas, the minimum liability limit for bodily harm is as low as $15,000; medical expenditures from a serious accident may easily exceed that sum.

What does underinsured motorist coverage pay for?

There are two kinds of underinsured motorist coverage:

• Underinsured motorist bodily injury, or UIMBI, covers medical expenditures, pain and suffering, funeral costs, and lost income if you are unable to work due to a collision with an at-fault driver who does not have enough automobile insurance to cover all losses.
• Underinsured motorist property damage, or UIMPD, covers car and property damage caused by a collision involving a minimally insured at-fault driver. A deductible may apply.

Which states require underinsured motorist coverage?

Ten states mandate drivers to have underinsured motorist coverage. In Virginia, car insurance is not required; however, if you do purchase it, your policy must include both underinsured motorist bodily injury and property damage.

Underinsured motorist coverage requirements by state

How much does underinsured motorist coverage cost?

Underinsured motorist coverage is often less expensive than other types of auto insurance. As with most types of insurance, increasing coverage limitations will result in a higher premium.

Drivers frequently choose to set their uninsured and underinsured motorist limits to the same amount as their liability limits. All three types of coverage are intended to protect your financial assets from the costs of an automobile accident, thus the larger your net worth, the higher the limits you may want set.

‘Stacking’ underinsured motorist coverage

Some states and insurance carriers enable you to “stack” your underinsured motorist bodily injury coverage, which means you can combine your limits for various vehicles to enhance your total maximum. This will often increase your premium.

Assume you have two vehicles on the same policy, each with $25,000 of underinsured motorist coverage. If you have stacked coverage and are in a collision with an underinsured driver, you will have a total of $50,000 in coverage for medical expenditures that exceed what the other driver’s insurance will pay.