Underinsured motorist coverage: how it works when the other driver’s insurance runs out
Learn the two policy details that decide your payment and how to choose UIM limits
Safety Behind the Wheel Foundation built this guide from consumer guidance published by the National Association of Insurance Commissioners (NAIC), the Texas Department of Insurance, the California Department of Insurance and the Washington State Office of the Insurance Commissioner, along with Washington’s underinsured motorist statute and National Highway Traffic Safety Administration (NHTSA) data. Every source is listed at the end.
Legally insured is not the same as fully covered
Every state sets a floor for auto liability insurance. Liability insurance pays for harm a driver causes to other people. That floor is often low. In Texas, the minimum is $30,000 for each injured person, $60,000 per accident and $25,000 for property damage [1]. California’s minimum is $30,000, $60,000 and $15,000 [2]. Washington’s is $25,000, $50,000 and $10,000 [3].
Now picture surgery, a hospital stay, months of therapy and lost work. A $25,000 per person limit may not go far.
The at fault driver still owes the rest. When a judgment or settlement is larger than a driver’s policy limits, that driver owes the difference [4]. But collecting from a person, rather than an insurer, is often slow and uncertain.
That gap is where UIM fits. NHTSA, the federal traffic safety agency, reports that 39,254 people died on the nation’s roads in 2024 [5]. Many more survive with injuries that need long care. The National Association of Insurance Commissioners (NAIC), the group of state insurance regulators, urges drivers to consider carrying more than the legal minimum [6].
This article explains how UIM works and how to buy it. If you are already hurt and facing a claim, see When the other driver’s insurance is too low to cover your injuries.
What underinsured motorist coverage pays for
UIM is coverage you buy on your own auto policy. NAIC describes it as coverage that pays when the driver at fault lacks enough insurance to pay your full loss [7]. NAIC’s shopping guide says it pays for bodily injuries to you and your passengers [6].
UIM is a close cousin of uninsured motorist (UM) coverage. UM applies when the at fault driver has no insurance or is a hit and run driver [7]. UIM applies when the driver has some insurance, just not enough. NAIC notes that most auto policies include this pair of coverages [8]. Washington’s law even counts a vehicle with no insurance as underinsured [11].
What UIM pays for depends on your state and policy. In Texas, the list includes medical bills for you and your passengers, plus pain and suffering [9]. It also covers car repairs, a rental car and your car’s lost value [9]. California’s insurance department describes UIM as protection when the other driver’s liability insurance is too small to pay the damages [10].
Why your own insurer may push back
UIM is tied to what you could collect from the driver who caused the accident. Washington’s law measures it against the damages you are “legally entitled to recover” [11]. So your own insurer can look at fault and at how large your losses are. Being a loyal customer does not mean every bill is accepted without questions.
When a driver counts as underinsured
The first question is simple: what is the test? Your policy needs a rule for deciding when the other driver’s insurance is “not enough.” There are two basic ways to measure it.
Comparing their limits with your losses
Washington uses this approach. A vehicle is underinsured when the total of its liability limits is less than the damages the injured person is legally entitled to recover [11]. If the at fault driver carries $25,000 and your losses are $120,000, that driver is underinsured. NAIC’s plain language definition follows the same idea [7].
Comparing their limits with your limits
A policy or state law could instead compare the at fault driver’s limits with your own UIM limits. Then the other driver counts as underinsured only when their limits are lower than yours. This hides a trap. If your UIM limit equals the state minimum, a minimum limits driver might never count as underinsured, however large your losses.
These made up figures show how much the test can matter.
Comparison compiled by Safety Behind the Wheel Foundation
How the two underinsured tests compare
| Example | Losses based test | Limits based test |
|---|---|---|
| Other driver has $30,000. Your UIM is $30,000. Your losses are $150,000. | Underinsured: $30,000 is less than $150,000 | Not underinsured: the two limits are equal |
| Other driver has $30,000. Your UIM is $250,000. Your losses are $150,000. | Underinsured | Underinsured: $30,000 is less than $250,000 |
The buying lesson is clear. UIM limits set at the state minimum may buy very little protection. Ask your agent or insurer, in writing, which test your policy uses.
Reduced or added on: how the payment is figured
The second question is how much your UIM pays once it applies. Ask whether the at fault driver’s payment is subtracted from your UIM limit. The answer changes the math a great deal.
- If the payment is subtracted (a reduction, or “offset,” approach), your UIM limit is the most you can get from both insurers combined.
- If your UIM pays on top (an “add on,” or “excess,” approach), it can pay up to its full limit beyond what the at fault driver’s insurer paid.
Here is one accident worked both ways, using made up numbers. The at fault driver’s insurer pays its full $30,000 limit. Your losses are $200,000. Your UIM limit is $100,000.
Comparison compiled by Safety Behind the Wheel Foundation
One claim paid two ways
| Where the money comes from | If subtracted | If paid on top |
|---|---|---|
| At fault driver’s insurer | $30,000 | $30,000 |
| Your UIM | Up to $70,000 | Up to $100,000 |
| Most you could collect from insurance | $100,000 | $130,000 |
Either way, your insurer still decides what your losses are worth. This detail only sets the ceiling.
Texas’s insurance department sums up the basic idea. When the other driver’s limits are too low, you file with your own company, and your UM/UIM or collision coverage is meant to cover the gap [1]. Washington’s insurance commissioner also says drivers with this coverage can file a claim with their own insurer [12].
How to tell which approach you have
Find the “limit of liability” paragraph in the UIM section of your policy. Wording that says amounts will be “reduced by” sums paid by or for the person at fault points to a reduction approach. If you cannot tell, ask your insurer to explain in writing how a payment from the at fault driver would change your UIM limit. State laws set rules for this coverage [11], so your state insurance department can also help.
What state laws require insurers to offer
As of October 2026, states take different approaches. NAIC lists UM and UIM among the coverages some states require by law [7]. In other states, such as Texas and California, insurers must offer the coverage, but you may turn it down [1, 2]. In the three states below, saying no takes a written rejection or a signed waiver.
Texas
Insurers must offer UM/UIM coverage. If you do not want it, you must turn it down in writing [1, 9]. The Texas Department of Insurance says you can usually buy more of this coverage in $5,000 steps [9]. It also says the deductible for this coverage is $250, which is likely lower than a collision deductible [9].
California
Insurers must offer uninsured motorist coverage. The state’s guide describes it as covering accidents with drivers who have no insurance or too little [2]. Declining it requires signing a waiver form [2]. The guide also says uninsured motorist bodily injury limits match your liability limits [2].
Washington
Washington requires auto liability policies to include UIM coverage, though it can be rejected in writing [11]. Unless the named insured or a spouse rejects them in writing, UIM limits must match the policy’s liability limits [11]. A written rejection is needed only when the policy is first issued, not at each renewal or replacement [11]. The law states that its goal is to protect people hurt by drivers who carry too little insurance [11].
That renewal rule deserves attention. If someone on your policy once turned down UIM or picked lower limits, that choice may still apply today.
How to choose your UIM limits
Frame the choice around one question. If a driver with minimum insurance seriously hurt someone in your car tomorrow, what would your household need? Think about medical care, lost pay, help at home and rides to appointments.
NAIC advises buying as much coverage as your budget reasonably allows [6]. Safety Behind the Wheel Foundation gives drivers the same advice. A common starting point is to match your UIM limits to your liability limits. Washington ties the two together unless you reject that in writing [11]. California’s guide describes the same match for uninsured motorist bodily injury [2]. The logic is simple: protect your own family at the same level you protect strangers.
When you shop, compare quotes that use the same limits [6]. Then ask what it would cost to move UIM up one level.
Comparison compiled by Safety Behind the Wheel Foundation
Household facts that point toward higher UIM limits
| If this describes your household | Why it points toward higher UIM limits |
|---|---|
| One paycheck pays most of the bills | Lost pay can hurt as much as medical bills |
| You often drive children, older relatives or a carpool | UIM can cover your passengers too [6] |
| Your health plan has a high deductible | UIM can help with costs your health plan leaves behind |
| You drive long distances or for work | More time on the road means more chances for a crash |
| You have a new teen driver | More drivers on the policy means more people to protect |
Coverage that works alongside UIM
- Medical payments coverage or personal injury protection (PIP) can help with early medical bills. See How medical payments coverage and PIP work after a crash.
- Health and disability insurance help, but they do not replace everything UIM can pay.
- If you have a personal umbrella policy, ask whether it includes UM/UIM.
- Combining UIM limits across vehicles, called stacking, is covered in a companion guide.
Reading your own policy, step by step
You need about 20 minutes and three documents: your declarations page, your full policy with its endorsements, and any form you signed about UM or UIM. The declarations page is the summary sheet that lists your coverages and limits. An endorsement is an add on page that changes the main policy.
- Find UIM on the declarations page. Look for a line such as “UM/UIM bodily injury” with two numbers, like 100/300.
- Compare that line with your liability line. If UIM is lower or missing, find out why.
- Ask your agent or insurer for copies of any forms that turned down or lowered UIM. In Washington, a rejection signed at the start can still apply at renewal [11].
- Read the definition of “underinsured motor vehicle.” Note whether it compares the other driver’s limits with your losses or with your own limits.
- Read the “limit of liability” paragraph. Look for “reduced by” wording.
- Read who counts as an “insured.” Check household relatives, passengers, you in a borrowed car, and you while walking or biking.
- Read the conditions section. Note any rules about notice and about settling with the at fault driver.
- Write down your questions and send them to your agent or insurer. Ask for answers in writing, and keep them with your policy.
Mistakes that leave families short
Most UIM problems start when the policy is bought, not after the accident.
- Signing a rejection form to trim the premium. It saves a little each month and can cost a great deal later.
- Buying UIM at the state minimum. Under a limits based test, it may never apply against a minimum limits driver.
- Raising liability limits but not UIM. Check both lines each time you change your policy.
- Counting on health insurance alone. Health plans pay medical bills. In Texas, UM/UIM can also pay for pain and suffering [9].
- Trusting the phrase “full coverage.” It has no single meaning. Look for a UIM line by name.
- Skipping a review after a life change. A new car, a new driver or a move to another state are good times to check.
How UIM supports recovery after a collision
Insurance cannot prevent a crash, but money often shapes recovery. Families may need rehab, follow up care and safe rides to appointments. Some need a new child car seat, changes at home, or a vehicle that fits a wheelchair.
When the at fault driver’s limits run out, UIM can help keep that care going. It can also ease the pressure to accept a first offer just to pay this month’s bills. Safe driving lowers your own risk, but you cannot control the driver in the next lane. The best time to close a coverage gap is before anyone needs it.
Frequently asked questions
Is underinsured motorist coverage the same as uninsured motorist coverage?
They are related but not the same. Uninsured motorist (UM) coverage applies when the at fault driver has no insurance or flees a hit and run [7]. Underinsured motorist (UIM) coverage applies when the driver has insurance, but not enough to pay your losses [7]. Many policies sell them together. Check your declarations page to see how your own policy lists them.
Does UIM cover me if I am a passenger in someone else’s car?
It depends on how each policy defines an “insured.” NAIC describes UIM as covering you and your passengers [6], but the details vary by policy and state. If you are hurt in someone else’s car, ask about both the owner’s policy and your own. If you often ride with others, ask your insurer now how your UIM applies when you are not in your own car.
Can my own insurance company dispute a UIM claim?
Yes. UIM is tied to what you are legally entitled to recover from the at fault driver [11]. So your insurer can question fault, whether the crash caused an injury, and what your losses are worth. If you have been hurt, our guide on serious injury claims covers the steps to take. Your state insurance department can help if a claim seems unfairly handled.
How much does UIM cost?
Prices vary by state, insurer, driving record and the limits you pick. The best way to judge is to get quotes with the same limits from more than one insurer [6]. Then ask each one what it would cost to raise UIM one step. Seeing the dollar difference for each level makes the choice easier.
I turned down UIM years ago. Can I add it now?
You can ask your agent or insurer to add UIM or raise your limits. Ask when the change takes effect, and get the new declarations page. A change will not reach back to a crash that already happened. In Washington, a written rejection made when the policy began can stay in force at renewal [11]. So it is worth checking, even if you do not remember signing anything.
The bottom line
Recommendation from Safety Behind the Wheel Foundation
Safety Behind the Wheel Foundation urges every driver to check their underinsured motorist coverage now, while everyone is safe. When another driver causes a crash, their insurance may be far too small for a serious injury. UIM is the part of your own policy built for that moment. How much it helps depends on two details: the test for “underinsured” and whether the other driver’s payment is subtracted from your limit.
Take 20 minutes to find your UIM line, read those two parts of your policy and check for old rejection forms. Then set limits that would protect the people who ride with you.
Related articles
- When the other driver’s insurance is too low to cover your injuries
- What to do when the driver who hit you has no insurance
- How medical payments coverage and PIP work after a crash
- Making sense of your insurance coverage after a serious car crash
- After a serious crash: fault, settlements, deadlines and your legal rights
Sources and further reading
- 1Texas Department of Insurance. Auto insurance guide. Updated December 11, 2025. tdi.texas.gov/pubs/consumer/cb020.html
- 2California Department of Insurance. Automobile Insurance Text Version. Updated February 5, 2025. insurance.ca.gov/…/auto101.cfm
- 3Washington State Office of the Insurance Commissioner. Washington state’s mandatory auto/motorcycle insurance law. Accessed October 2026. insurance.wa.gov/…/washington-states-mandatory-automotorc…
- 4National Association of Insurance Commissioners. Consumer Auto. Accessed October 2026. content.naic.org/consumer/auto-insurance.htm
- 5National Highway Traffic Safety Administration. NHTSA home page: 39,254 lives lost on U.S. roads in 2024. Accessed October 2026. Data year: 2024. nhtsa.gov
- 6National Association of Insurance Commissioners. A Shopping Tool for Auto Insurance. Published 2023. content.naic.org/…/consumer-auto-shopping-tool.pdf
- 7National Association of Insurance Commissioners. A Consumer’s Guide to Auto Insurance. Published 2022. content.naic.org/…/publication-aut-pp-consumer-auto.pdf
- 8National Association of Insurance Commissioners, Center for Insurance Policy and Research. Auto Insurance. Updated January 26, 2023. content.naic.org/…/topic_auto_insurance.htm
- 9Texas Department of Insurance. What is uninsured motorist coverage, and do I really need it? Updated October 14, 2024. tdi.texas.gov/…/uninsured-motorist-coverage.html
- 10California Department of Insurance. Automobile Insurance Terms. Updated July 2011. insurance.ca.gov/…/autoterms.cfm
- 11Washington State Legislature. RCW 48.22.030: Underinsured, hit-and-run, phantom vehicle coverage to be provided. Last amended 2015 (2015 c 236). app.leg.wa.gov/rcw/default.aspx?cite=48.22.030
- 12Washington State Office of the Insurance Commissioner. What to do if you’re hit by an uninsured or underinsured driver. Accessed October 2026. insurance.wa.gov/…/what-do-if-youre-hit-uninsured-or-unde…
This article reflects the safety priorities of auto insurance consumer protection and financial security for injured people and their families. It is general education, not legal, insurance or financial advice. State laws and policy terms change, so verify them with official sources. For your own situation, contact your insurer or agent, your state insurance department, or a licensed attorney in your state. Reviewed October 2026.
Cite this article: Safety Behind the Wheel Foundation. “Underinsured motorist coverage: how it works when the other driver’s insurance runs out.” drivewithcare.org, https://drivewithcare.org/underinsured-motorist-coverage-how-it-works/. Reviewed October 2026.
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