What is Underinsured Coverage?

Underinsured coverage

If you’ve ever been in a car accident caused by another driver, you might assume their insurance will fully cover your medical bills, lost wages, and other damages. Unfortunately, that’s not always the case. Many drivers carry only the minimum liability coverage required by law — and in serious accidents, that can fall far short of what you actually need to recover.

That’s where Underinsured Motorist (UIM) coverage comes in. But not all UIM policies are created equal. Depending on your state and your insurance carrier, you may have either a conversion or a limit trigger policy. And it’s also important to know how UIM coverage differs from Uninsured Motorist (UM) coverage.

Let’s break it down.

What Is Underinsured Motorist (UIM) Coverage?

Underinsured Motorist coverage protects you when the at-fault driver’s liability limits aren’t enough to cover the full extent of your damages.

Example:

You’re hit by a driver who has $25,000 in liability coverage. Your total damages are $60,000. Without UIM coverage, you could only recover the $25,000 from their insurance — leaving you $35,000 short. With UIM, your own policy can step in to cover the difference (up to your policy limits).

Conversion vs. Limit Trigger UIM Policies

1. Conversion Policies (Preferred for Policyholders)

With a conversion policy, your UIM limits are added on top of whatever the at-fault driver’s insurance pays.

Using the example above:

• At-fault driver pays: $25,000

• Your UIM coverage: $50,000 limit

• You can collect $25,000 + $50,000 = $75,000 total.

This type of policy “converts” your UIM coverage into additional funds, rather than subtracting the other driver’s coverage from your limit.

2. Limit Trigger Policies (More Restrictive)

With a limit trigger policy, your UIM coverage only applies if your UIM limit is higher than the at-fault driver’s liability limit — and the other driver’s payment is subtracted from your UIM limit.

Using the same example:

• At-fault driver: $25,000 limit

• Your UIM: $50,000 limit

• You can recover $50,000 total, not $75,000 — because the $25,000 from the other driver is deducted from your $50,000 UIM limit.

If you and the at-fault driver have the same coverage limits, you may get nothing under a limit trigger policy.

Underinsured vs. Uninsured Motorist Coverage

While UIM coverage helps when the other driver has some insurance but not enough, Uninsured Motorist (UM) coverage applies when:

• The at-fault driver has no insurance at all

• The at-fault driver’s insurance company denies coverage or goes out of business

• The at-fault driver is a hit-and-run driver who can’t be identified

Think of it this way:

• UM = They have no insurance at all

• UIM = They have insurance, but not enough

Why This Matters

The differences between conversion and limit trigger policies — and between UM and UIM coverage — can make tens of thousands of dollars of difference in what you actually recover after a serious accident.

Takeaways:

• Check your auto policy or state law to see if your UIM coverage is conversion or limit trigger.

• Consider increasing your UM/UIM limits — the extra cost is often small compared to the protection it provides.

• If you’re injured in a crash involving an underinsured or uninsured driver, talk to an experienced personal injury attorney. Insurance companies often undervalue claims or misapply coverage rules, and an attorney can help make sure you get every dollar you’re entitled to.

Need Help With an Underinsured or Uninsured Claim?

If you’ve been injured in a car accident and believe the at-fault driver’s coverage may not be enough, our personal injury attorneys can review your insurance policy, explain your options, and fight to secure the compensation you deserve. Contact us today for a free consultation.