Underinsured motorist coverage (UIM) pays for your injuries when an at-fault driver has auto insurance, but their liability limits are too low to cover your damages. After the at-fault driver's insurance pays its maximum, your UIM coverage makes up the difference, up to your own limits. It's the companion to uninsured motorist coverage, and the two are often sold together.
How it works
After a serious accident caused by another driver, you first recover from their bodily injury liability coverage. If your damages exceed their limit, you then claim the shortfall under your own underinsured motorist coverage. Depending on your state, UIM pays either the difference between your limit and theirs, or stacks on top of their payment — an important distinction your agent can explain for your state.
Example: another driver runs a red light and causes you $150,000 in medical bills and lost wages, but carries only a $25,000 bodily injury limit — the minimum in many states. Their insurer pays its full $25,000. If you carry $250,000 in underinsured motorist coverage, your own policy covers the remaining $125,000. Without UIM, collecting the rest would mean suing a driver who likely can't pay. Numbers are illustrative.
Like uninsured motorist coverage, UIM is written with per-person and per-accident limits and protects you, your passengers, and resident family members — even as a pedestrian or cyclist in many policies.
Why it matters for your policy
Many drivers carry only state-minimum liability limits, and those minimums haven't kept pace with medical costs. That means the driver who seriously injures you is statistically likely to be underinsured for the damages — making UIM one of the most personally valuable coverages on your own policy.
The standard advice is to match your UM/UIM limits to your own bodily injury liability limits. The common mistake is carrying high liability limits to protect others while accepting low UM/UIM limits for yourself — effectively insuring strangers better than your own family. Since UIM is usually inexpensive at higher limits, matching them rarely moves the premium much.
Related terms
- Uninsured motorist coverage — The companion coverage for drivers who carry no insurance at all.
- Bodily injury liability — The other driver's coverage that runs out first — UIM picks up where it stops.
- Medical payments coverage — Fast, smaller-limit medical coverage that pays regardless of fault.
- Personal injury protection — No-fault injury and lost-wage coverage required in some states.
- Umbrella insurance — Some umbrella policies can add UM/UIM protection on top — ask your agent.
Want a second set of eyes on your policy? Better Choice Insurance Group is an independent agency in St. Charles, Illinois, licensed in 14 states. We'll explain your coverage in plain English and compare quotes across our carriers — free, no obligation.
Frequently asked questions
What's the difference between uninsured and underinsured motorist coverage?
Uninsured motorist coverage applies when the at-fault driver has no insurance or can't be identified after a hit-and-run. Underinsured motorist coverage applies when they have insurance but their limits are lower than your damages. Together they close the gap between what the other driver carries and what your injuries actually cost.
How much underinsured motorist coverage should I carry?
A common rule is to match it to your own bodily injury liability limits — for example, if you carry 100/300 liability, carry 100/300 UM/UIM. Your injuries deserve at least the same protection you buy for strangers, and higher UIM limits are typically inexpensive.
Do I have to sue the other driver before using UIM?
Generally no. You (or your attorney) settle with the at-fault driver's insurer for their policy limit, then present the underinsured motorist claim to your own carrier. Most policies require you to notify your insurer before accepting the other side's settlement, so involve your carrier early.
Last reviewed: August 2026 · Reviewed by Evan Larson, Licensed Insurance Agent