Underinsured Motorist Coverage
Auto insurance coverage that protects you when you're injured by a driver who has insurance but not enough to cover your damages. It pays the difference between the at-fault driver's insufficient coverage and your actual losses, up to your policy limits.
Example
“When the at-fault driver's $25,000 policy couldn't cover Jake's $75,000 in medical bills, his underinsured motorist coverage paid the additional $50,000 needed.”
Memory Tip
Think 'UIM = Unfortunately Insufficient Money' - it protects you when the other driver's money (insurance) is unfortunately insufficient to cover your damages.
Why It Matters
This coverage is crucial because many drivers carry only minimum state-required insurance, which is often inadequate for serious accidents involving significant medical bills or lost wages. Without underinsured motorist coverage, you could face substantial out-of-pocket expenses even when the accident wasn't your fault, potentially leading to financial hardship or bankruptcy.
Common Misconception
Many people assume that if the other driver has insurance, they'll be fully compensated for their damages, not realizing that minimum coverage requirements are often very low. Another common misconception is that their own collision coverage will handle everything, when in fact collision coverage only pays for vehicle damage, not medical expenses or lost wages.
In Practice
Consider an accident where the at-fault driver has the minimum required coverage of $25,000 per person for bodily injury, but your medical bills, lost wages, and pain and suffering total $100,000. The at-fault driver's insurance pays their $25,000 limit, leaving you $75,000 short. If you have $100,000 in underinsured motorist coverage, your insurance would pay the remaining $75,000. Without this coverage, you'd be personally responsible for collecting the $75,000 from the at-fault driver, which may be impossible if they lack sufficient assets.
Etymology
The term evolved from the recognition that minimum state-required insurance levels often fall short of covering serious accident costs, creating a need for additional protection against 'underinsured' rather than completely uninsured drivers.
Common Misspellings
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