Uninsured and Underinsured Motorist Claims Explained

By Serdar Arslan, editor · Last reviewed November 3, 2026 · 8 min read · How we research

The other driver's insurance card turns out to be expired. Or the card is real, but the policy caps out at $25,000 and your hospital bill alone is past that. This happens more than people think. The Insurance Research Council (IRC) estimated that 15.4% of U.S. drivers were uninsured in 2023, and that 33.4% were either uninsured or underinsured, even though almost every state requires liability insurance or proof of financial responsibility. When one of them hits you, your own uninsured motorist (UM) and underinsured motorist (UIM) coverage may end up paying most of your injury claim.

What UM and UIM coverage do

Uninsured motorist (UM) coverage pays you, and usually passengers in your car, when the at-fault driver has no liability insurance. In most states it also applies to many hit-and-run crashes where the driver can't be identified.

Underinsured motorist (UIM) coverage pays when the at-fault driver has insurance, but their limits are too low to cover your losses.

In effect, your own insurer steps into the shoes of the at-fault driver and pays what that driver should have paid, up to your UM/UIM limits.

Depending on your state and policy, UM/UIM may cover:

Medical bills
Lost wages
Pain and suffering
Car repairs (UM property damage, available in some states)
A rental car in some policies

The Texas Department of Insurance (TDI), for example, explains that UM/UIM can pay for car repairs, medical bills, property in your car, a rental car, and pain and suffering costs. Texas also requires insurers to offer the coverage, and if you don't want it, you must reject it in writing.

Is UM/UIM required?

It depends on your state. Some states require UM coverage, some require UIM, some require both, and others only require insurers to offer it. New Jersey, for example, requires minimum UM/UIM coverage on its Standard Policy and lets drivers buy higher limits. Check your state's page under car accident laws and your own declarations page.

How UIM limits are calculated

States use one of two basic approaches, and the difference can be large.

"Difference in limits" (reduction) approach

Your UIM coverage pays only the gap between your UIM limit and the at-fault driver's liability limit. New Jersey's Department of Banking and Insurance gives this kind of example: if your limit is $50,000 more than the other driver's limit, your UIM claim can't exceed that $50,000 gap.

"Excess" (add-on) approach

Your UIM coverage sits on top of the at-fault driver's coverage. If your losses are larger than their limit, your UIM pays the excess up to your full UIM limit.

Example	Difference approach	Excess approach
Your losses	$120,000	$120,000
At-fault driver's liability limit	$25,000	$25,000
Your UIM limit	$100,000	$100,000
UIM pays up to	$75,000 ($100k − $25k)	$95,000 (losses above $25k, up to $100k)
Total recovery	$100,000	$120,000

This table is a simplified illustration. Your policy language and state law control the actual result.

Stacking

In some states you can "stack" UM/UIM limits, combining coverage from multiple vehicles on one policy or multiple policies in your household. Other states prohibit stacking or let insurers exclude it. Ask your insurer or check your policy.

How to make a UM or UIM claim

1. Report the crash quickly

Call the police and get a report, especially if the other driver is uninsured or left the scene. Notify your insurer promptly. Many policies have strict notice rules, and late notice can give the insurer a reason to deny the claim.

2. Confirm the other driver's coverage

For a UM claim, you'll need evidence that the other driver had no insurance, such as a denial letter from the insurer they named or a police report noting no insurance. For UIM, you'll need proof of their policy limits.

3. File under the right coverage

TDI explains that your collision coverage can pay for repairs, and UM/UIM applies if the at-fault driver had no or too little insurance, or in hit-and-run cases where you didn't get their information. PIP or medical payments coverage may also help with medical bills. See medical bills and liens.

People lose UIM claims over this one. Many policies say that if you settle with the at-fault driver without your insurer's permission, you may lose your UIM coverage. This is because your insurer may have a right to recover its payment from the at-fault driver. Notify your insurer in writing of any offer from the at-fault driver's company and ask for consent before you accept.

5. Document your damages

Treat a UM/UIM claim like any injury claim. Gather medical records, bills, wage records, and evidence of pain and suffering. See how car accident settlements work.

6. Negotiate

Your insurer owes you a duty of good faith, but on a UM/UIM claim it's also deciding how much it owes you. The tone of the claim can feel adversarial even though you're the customer.

Your insurer is on both sides

Here's the awkward part. You're the policyholder, so you have cooperation duties under the policy, which may include giving a recorded statement, allowing a medical exam, or providing records. At the same time, the insurer is evaluating your claim much as the at-fault driver's insurer would.

If you and your insurer can't agree, many policies require arbitration. Others allow a lawsuit. Read the dispute section of your policy.

Deadlines

UM/UIM claims can have their own deadlines that are different from the general injury statute of limitations. Some come from state law and some from the policy. Check both, and don't assume you have the same amount of time you'd have to sue the other driver. Our statute of limitations calculator is a starting point; confirm with your policy or a licensed attorney.

Will a UM claim raise my rates?

Many states limit insurers from raising rates for a claim when you weren't at fault, but rules differ. Ask your state insurance department or check its website.

Common mistakes

Settling with the at-fault driver without your insurer's written consent
Waiting too long to notify your insurer
Not knowing your own limits until after the crash
Assuming health insurance will cover everything; TDI notes health plans may not cover long-term care needs if a crash leaves you unable to work
Overlooking other policies, such as a household member's policy that may also cover you

Should you buy more UM/UIM?

That's a personal financial decision, but it's worth reviewing your limits. If you carry higher liability limits than your UM/UIM limits, ask your agent what it would cost to match them. TDI suggests talking with your agent about how much to carry.

When to get help

Consider talking to a licensed attorney if:

Your injuries are serious and the at-fault driver has minimum limits
Your insurer denies the claim or disputes value
Your policy requires arbitration
You need to coordinate a liability settlement with a UIM claim

See do I need a lawyer.

Before you accept the other driver's policy limits

UM covers a driver with no insurance; UIM covers one with too little. With roughly a third of drivers in one group or the other by IRC's estimate, it's worth pulling out your declarations page today. Find out whether your state uses the "difference in limits" or "excess" method, since in the example above that choice was worth $20,000. If the at-fault insurer offers its full limits, get your own insurer's written consent before you sign. Check the policy for its own deadlines and any arbitration clause. And keep copies of everything you send, because the company you pay premiums to is also the one deciding what your claim is worth.