Chris Tepedino is a feature writer that has written extensively about car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, research investigative pieces…

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states…

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Reviewed byRachael Brennan
Licensed Insurance Agent for 14 Years

UPDATED: Aug 11, 2020

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Imagine you’re driving down the road, minding your own business while waiting for the light to turn from red to green, when — BAM — someone hits your vehicle from behind. Now imagine that the culpable driver doesn’t have very much insurance coverage, and their company either can’t or won’t pay to get your vehicle fixed.

Do you know what to do in such a situation?

Well, if you have underinsured motorist automobile insurance coverage on your policy, you won’t have to worry about much. Underinsured motorist coverage is an auto insurance coverage option in some states and required coverage in others.

Whether you are required to carry it or choose to, it can be the difference between getting your car repaired or not if you’re hit by a driver without enough coverage. To find underinsured motorist coverage near you, use our FREE tool to compare auto insurance coverage now.

Underinsured Drivers and You

An underinsured motorist, as far as your automotive insurance provider is concerned, is any driver who has insurance but has not purchased enough coverage to pay for all of the damages from an accident they cause. Usually it’s someone who only meets the minimum car insurance requirements as set forth by state law. And if one of them causes an accident with you and/or your vehicle, having underinsured motorist insurance can protect you financially.

Usually, your insurance provider will sell you Underinsured Motorist coverage hand-in-hand with a similar form of coverage: Uninsured Motorist. But just because these types of coverage are so similar doesn’t mean they are interchangeable; they are very different, and you should know what each does and does not cover.

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Underinsured Motorist Coverage

This type of accident insurance recompenses you for the monetary damages that the underinsured driver’s insurance does not pay. It usually covers you and passengers in your car at the time of the accident, and other family members listed on the policy while driving other cars.

It is important to know exactly how your coverage works. Underinsured driver’s insurance has a limit of how much it will cover. Your insurance will pay up to the dollar amount listed in your policy less whatever the at-fault driver’s policy has paid. So if your coverage is up to $25,000, and the at-fault driver’s policy covers you up to $10,000, then your policy covers you for up to an additional $15,000 as needed.

In certain states, underinsured motorist insurance policies allow you to stack multiple policies together. This means that if you own more than one car and have a policy for each car with the same insurance provider, you can use both of them towards a single accident. If your damages totaled $20,000 with one car and the policies on each car cover you only to $10,000, you could pool them together to cover you in a specific accident.

It’s also important to understand the circumstances under which your underinsured driver coverage won’t protect you. Some common situations include:

  • If the underinsured motorist can cover the damages for the accident out-of-pocket
  • If you are hit by a government vehicle
  • If you’re hit by a family member with a car owned by you that isn’t covered in the insurance policy

State Laws

Most states have laws governing underinsured driver’s insurance. In some states, this variety of coverage is a requirement, while in other states it is simply optional. Still, other states automatically provide it for you unless you formally reject the coverage.

Each state will vary in its laws, and companies will vary in their policy terms. In states that require this kind of automobile insurance, there is usually a minimum and maximum coverage requirement. You can even purchase additional underinsured motorist insurance if need be. In states where it is optional, it must be made readily available to you. This can be done by written notice or through special offers when you first sign up. So it is important to speak with an insurance agent that knows your state laws and will get you a policy that is right for you.