What Is Underinsured Motorist Coverage (UIM)?

Underinsured motorist coverage is a type of auto insurance. It protects you if you're in an accident caused by someone who doesn't have sufficient insurance of their own. In general, if the at-fault driver's policy has a limit that's lower than the cost of the damage to your vehicle or your medical bills, and you have UIM coverage, your insurance company will cover the remaining amount.

The definition of "underinsured" and how UIM coverage works varies by state. Underinsured motorist coverage is required in some states and can be purchased as an endorsement on your car insurance policy in others.

How Underinsured Motorist Coverage Works

Let's say you're in a car accident that wasn't your fault. After making sure everyone's OK, you exchange information with the other driver, take photos of the damage, and file a claim with your insurance company. But when your insurer contacts the other driver's insurer for payment, it turns out that they only carried the minimum amount of liability coverage—which won't be enough to cover the repairs to your damaged car. If you have underinsured motorist coverage, it will kick in to cover the additional costs, up to the limit of your policy.

Underinsured motorist coverage typically includes two parts:

• Bodily injury coverage, which covers medical bills and may cover lost wages
• Property damage coverage, which covers the cost to repair or replace your vehicle

However, in some states, only UIM bodily injury coverage is available.

Benefits of Underinsured Motorist Coverage

Liability insurance, which pays for the cost of damages due to an accident for which you're at fault, is required in every state except New Hampshire. Virginia lets drivers opt out of purchasing insurance if they pay a $500 annual fee.

​​​​​​​Each state sets its own required minimum coverage amounts. But the state minimum amount may not be enough to cover the costs of repairing or replacing your car after a serious accident, or to pay for medical bills as you recover from your injuries. That's where underinsured motorist coverage can prove beneficial. If you're in an accident where the driver who was found to be at fault does not have enough insurance to cover the cost of damages from the crash, your UIM coverage will pay for the rest, up to your own policy limits.

The Bottom Line

Underinsured motorist coverage protects you when after an accident caused by a driver who doesn't have enough insurance to cover the costs of your medical bills and property damage. It's required in some states and available as an optional endorsement in others.