How Much Underinsured Motorist Coverage Do I Need
Match your underinsured motorist coverage to your own liability limits, since that's the gap it's meant to cover.
It exists to fill the gap other drivers leave behind
Underinsured motorist coverage pays you when the other driver is at fault but didn't carry enough liability coverage to cover what you lost. As a newer driver, you may not yet grasp how common this is. Plenty of drivers on the road carry only the minimum their state requires, and that minimum is often far less than what a real injury or lawsuit could cost.
The standard advice is to set this coverage equal to your own liability limits. The reasoning is simple. If you'd want someone else's policy to cover a certain amount when you cause an accident, you should want your own policy to cover you by that same amount when someone else does. Buying less than your liability limit leaves you exposed in the exact situation this coverage is supposed to solve.
Where this gets more personal for you is that you likely don't have savings built up from years of working, and you may not own a home yet. That means a serious accident where the other driver is underinsured could hit you harder than it would hit someone with more assets or more years of earning behind them. Coverage that looks excessive to a veteran driver might be exactly right for someone in your position.
States differ on whether this coverage is required, sold automatically unless you decline it, or optional from the start. Insurers differ on how they structure limits and whether they combine this with uninsured motorist coverage into one number. Check your state's rule and your insurer's structure before you decide, since the starting point isn't the same everywhere.
What to look at before you set a number
- Match your liability limit Set underinsured motorist coverage equal to what you carry in liability coverage. This keeps your protection consistent with what you're already paying for.
- Check your state's default Some states require this coverage or add it automatically unless you opt out. Ask your insurer what your state does before assuming you have to add it yourself.
- Count what you'd lose Think about lost income, medical bills and ongoing care, not just car repair. A new driver with little savings has more to lose from being underinsured than most people realize.
- Ask about stacking Some insurers let you combine coverage across multiple vehicles on one policy for a higher effective limit. Ask whether this is available and whether it changes your decision.
- Revisit it as you grow Your needs change as your income, assets and family situation change. Plan to review this coverage every year or two instead of setting it once and forgetting it.
Whether you raise this coverage above the minimum
If you do
You pay a bit more now, but if a driver with too little insurance hits you, your own policy picks up the difference for medical bills, lost income and other costs. You avoid having to sue an uninsured driver directly or absorb the loss yourself while you're still early in your working life.
If you don't
You save a small amount today, but you're betting that whoever hits you will carry enough insurance to cover what happens. If they don't, you could face real costs with no one to collect from, at a point when you likely have little saved to absorb that kind of hit.
Now that you know what number to aim for, compare quotes to see what that level of coverage actually costs.
Does underinsured motorist coverage cover my own car damage?
No, it covers injuries, not vehicle damage, in most states. A separate part of your policy, usually collision coverage, handles damage to your own car. Underinsured motorist coverage steps in for medical bills, lost income and related costs when the at-fault driver's liability coverage isn't enough to pay them. Some states include a property damage version, so check your state's rules if your car's damage matters to you here.
Is underinsured motorist coverage the same as uninsured motorist coverage?
No, they cover different situations. Uninsured motorist coverage applies when the at-fault driver has no insurance at all. Underinsured motorist coverage applies when they have insurance, but not enough to cover your losses. Many insurers sell them together as one combined limit, but some separate them. Ask your insurer how your policy structures the two, since that affects how you should think about your overall limit.
Will my rates go up if I raise my underinsured motorist coverage?
Usually only slightly, since this coverage tends to cost less than liability or collision coverage per added amount. As a newer driver, your rate is already shaped mostly by your lack of driving history, so this particular increase is unlikely to be the main driver of your premium. Ask for a quote at a couple of different limits so you can see the actual difference before deciding.
The coverage you'd expect from another driver is the coverage you should expect from yourself.
