Underinsured Motorist Claims: What to Do When Coverage Is Not Enough

What Can You Do When the At-Fault Driver’s Insurance Coverage Is Not Enough?

You did everything right. You wore your seatbelt, obeyed the speed limit, and drove defensively. Then another driver ran a red light, rear-ended you at 50 miles per hour, or drifted across the center line and changed your life forever. The injuries are serious — a herniated disc, a fractured pelvis, a traumatic brain injury — and the medical bills are piling up fast. Then comes the gut punch: the at-fault driver only carries the state minimum liability insurance, perhaps $25,000 or $30,000 (see state minimums ranging from $15,000 in states like Florida per Fla. Stat. § 324.021 to $50,000 in Alaska), and your damages already exceed six figures.

This scenario plays out thousands of times every day across the United States. According to the Insurance Research Council’s 2023 report on uninsured motorists, roughly one in eight drivers (approximately 14%) carries no insurance at all, and a staggering number carry only the bare minimum required by their state. When you’re seriously injured by one of these drivers, their policy is woefully inadequate to cover your medical expenses, lost wages, and pain and suffering. That’s where underinsured motorist (UIM) coverage becomes your financial lifeline.

At Maxx Compensation, attorney Charles C. Teale has helped countless accident victims navigate the complex process of filing underinsured motorist claims and recovering the full compensation they deserve — even when the at-fault driver’s insurance falls far short. This guide will walk you through everything you need to know about UIM coverage, how to file a claim, and what to do when your own insurance company refuses to pay what your claim is worth.

What Is Underinsured Motorist Coverage?

Underinsured motorist (UIM) coverage is a type of auto insurance that protects you when the at-fault driver’s liability insurance is insufficient to cover your total damages. It is a component of your own auto insurance policy, meaning you file the claim with your own insurer — not the other driver’s.

Here’s a simple example. Suppose you’re injured in a car accident caused by another driver. Your total damages — including medical bills, lost income, future treatment costs, and pain and suffering — amount to $250,000. The at-fault driver carries only $50,000 in liability coverage. If you have UIM coverage with a $250,000 limit, you can file an underinsured motorist claim with your own insurer to recover up to the difference, potentially an additional $200,000.

UIM coverage is distinct from uninsured motorist (UM) coverage, which applies when the at-fault driver has no insurance at all. Some states combine UM and UIM into a single coverage, while others treat them separately. Understanding how your state handles these coverages is critical to knowing your rights after an accident.

Is UIM Coverage Required?

Requirements vary dramatically by state. Some states mandate UIM coverage as part of every auto policy. Others make it optional but require insurers to offer it. A handful of states don’t require it at all, which means many drivers unknowingly leave themselves exposed. Even in states where UIM coverage is optional, your insurer is typically required to offer it to you when you purchase your policy — and to obtain a written waiver if you decline it. If your insurer failed to properly offer UIM coverage and you were never given the chance to purchase it, you may have grounds for an insurance bad faith claim.

How Do Underinsured Motorist Claims Work?

Filing a UIM claim is fundamentally different from a standard third-party liability claim against the at-fault driver’s insurer. When you pursue a UIM claim, you are making a demand against your own insurance company under a policy you purchased and paid premiums for. This creates unique challenges and strategic considerations at every stage.

Step 1: Resolve or Settle the At-Fault Driver’s Liability Claim First

In most states, you must first exhaust the at-fault driver’s liability coverage before your UIM coverage kicks in. This means you typically need to settle with or obtain a judgment against the at-fault driver’s insurer for their full policy limits. This is critical — if you settle the liability claim for less than the at-fault driver’s policy limits without your UIM carrier’s consent, you may jeopardize your right to recover UIM benefits.

Before accepting any settlement from the at-fault driver’s insurer, notify your own UIM carrier in writing. Most policies contain a consent-to-settle clause requiring you to get your insurer’s permission before settling with the at-fault driver. Failing to comply with this provision can give your insurer grounds to deny your UIM claim entirely.

Step 2: File Your UIM Claim With Your Own Insurer

Once the at-fault driver’s liability limits are exhausted, you submit a formal UIM claim to your own insurance company. This claim should include all documentation supporting your damages: medical records, billing statements, proof of lost wages, expert opinions on future care needs, and evidence of pain and suffering. The more thoroughly documented your claim, the stronger your negotiating position.

Step 3: Your Insurer Investigates and Responds

Your insurance company will assign an adjuster to evaluate your UIM claim. Under most state insurance codes (see, e.g., Cal. Ins. Code § 790.03), the adjuster owes you the same duty of good faith owed to any first-party claimant. Despite the fact that you are their policyholder — a customer who has faithfully paid premiums — the adjuster’s job is to minimize the company’s payout. This creates an inherent conflict of interest. Your insurer owes you a duty of good faith and fair dealing, but their financial incentive is to undervalue your claim.

If your insurer offers a lowball settlement or employs delay tactics to stall your claim, they may be acting in bad faith. Recognizing common bad faith tactics is essential to protecting your rights during the UIM claims process.

Step 4: Negotiate, Arbitrate, or Litigate

If your insurer’s offer is inadequate, you have several options: continue negotiating, demand arbitration (if your policy contains an arbitration clause), or file a lawsuit. Each option has advantages and drawbacks, which we discuss in detail below.

How Are UIM Coverage Limits Calculated, and What Is Stacking?

One of the most misunderstood aspects of underinsured motorist coverage is how limits are calculated and whether you can “stack” multiple policies to increase your available coverage.

How UIM Limits Are Calculated

UIM coverage calculations vary by state, and the differences can be worth tens or even hundreds of thousands of dollars. There are two primary methods:

• Offset method: Your UIM coverage pays the difference between the at-fault driver’s liability limits and your UIM limits. For example, if you have $100,000 in UIM coverage and the at-fault driver has $50,000 in liability coverage, your UIM policy would pay up to $50,000 (the “offset” or gap between the two amounts).
• Add-on method: Your UIM coverage pays on top of whatever you collect from the at-fault driver. Using the same example, you could collect up to $50,000 from the at-fault driver plus up to $100,000 from your UIM policy, for a total of $150,000.

Which method applies depends entirely on your state’s laws. Some states allow insurers to choose which method they use, making it essential to read your policy carefully or have an attorney review it.

What Is UIM Stacking?

Stacking allows you to combine UIM coverage limits from multiple vehicles on a single policy or across multiple policies to increase the total amount of UIM coverage available to you. For example, if you have a policy covering three vehicles, each with $100,000 in UIM coverage, stacking would give you $300,000 in total UIM coverage.

Not all states permit stacking, and many policies include anti-stacking provisions. However, courts in several states have invalidated anti-stacking clauses as contrary to public policy. Whether you can stack depends on your state’s laws, your policy language, and sometimes the circumstances of the accident.

If you have multiple vehicles or multiple insurance policies (for example, a personal policy and a policy through your employer), stacking could significantly increase your recovery. An experienced car accident lawyer can analyze your policies and determine the maximum UIM coverage available to you.

What Happens When Your Own Insurer Acts in Bad Faith on a UIM Claim?

Here’s an uncomfortable truth that most people don’t realize until they file a UIM claim: when it comes to UIM coverage, your own insurance company is effectively your adversary. You purchased the policy and paid premiums in good faith. In return, your insurer is contractually and legally obligated to handle your claim fairly, promptly, and in good faith. Too often, they don’t.

Common Bad Faith Tactics in UIM Claims

Insurance companies employ a range of tactics to avoid paying fair value on UIM claims. These include:

• Unreasonable delays in investigating, processing, or responding to your claim
• Lowball offers that ignore the full extent of your injuries and damages
• Disputing medical treatment by claiming procedures were unnecessary or unrelated to the accident
• Refusing to consider future damages such as ongoing medical care, future surgeries, or diminished earning capacity
• Misrepresenting policy provisions to make you believe you’re entitled to less than you actually are
• Demanding excessive documentation beyond what is reasonable to evaluate the claim
• Failing to communicate by ignoring phone calls, emails, and letters from you or your attorney

Every insurance company owes its policyholders an implied covenant of good faith and fair dealing, as established in Comunale v. Traders & General Insurance Co., 50 Cal.2d 654 (1958). When your insurer violates this duty in handling your UIM claim, you may have grounds to pursue an insurance bad faith lawsuit in addition to your underlying UIM claim. Bad faith claims can result in additional damages beyond your policy limits, including emotional distress damages and, in egregious cases, punitive damages.

Warning Signs Your UIM Claim Is Being Handled in Bad Faith

Be alert to these red flags during the UIM claims process:

• Your adjuster takes weeks or months to return calls or acknowledge correspondence
• The insurer makes an offer without reviewing your complete medical records
• Your claim is denied based on a policy exclusion that doesn’t actually apply
• The insurer pressures you to accept a quick settlement before you’ve finished medical treatment
• You receive a settlement offer that doesn’t account for your documented lost wages, future medical needs, or non-economic damages
• The insurer hires a “paper review” doctor who never examined you to dispute your treating physician’s opinions

If any of these situations sound familiar, consult with an insurance bad faith attorney immediately. There are strict deadlines for bringing bad faith claims, and early legal intervention can preserve critical evidence.

Should You Choose Arbitration or Litigation to Resolve a UIM Dispute?

When negotiations with your UIM carrier stall, you have two primary paths to resolve the dispute: arbitration and litigation. Understanding the pros and cons of each is essential to making an informed decision about your claim.

Arbitration

Many auto insurance policies include mandatory arbitration clauses for UIM disputes. In arbitration, a neutral third party (the arbitrator) hears both sides and issues a binding or non-binding decision, depending on the terms of your policy and state law.

Advantages of arbitration:

• Typically faster than litigation — often resolved within a few months rather than a year or more
• Less formal and less expensive than a full trial
• Private proceedings (no public court record)
• Arbitrators are often retired judges or experienced attorneys with relevant expertise

Disadvantages of arbitration:

• Limited discovery — you may have less ability to obtain documents and testimony from the insurer
• Limited appeal rights — binding arbitration decisions are very difficult to overturn
• Some arbitration clauses cap the amount you can recover
• No jury — and juries are often more sympathetic to injured individuals than a single arbitrator

Litigation

Filing a lawsuit against your UIM carrier gives you access to the full arsenal of legal tools: depositions, document requests, interrogatories, expert witnesses, and trial by jury. Litigation is generally more time-consuming and expensive, but it can yield significantly larger verdicts, particularly when the insurer has acted in bad faith.

In many cases, the mere act of filing a lawsuit motivates the insurer to negotiate more seriously. Insurance companies know that juries can be unpredictable — and generous — which gives you substantial leverage once litigation commences.

The right approach depends on the specifics of your case, the amount in dispute, your evidence, and your policy language. An experienced attorney can advise you on the strategy most likely to maximize your recovery.

What Strategies Can Maximize Your UIM Recovery?

Recovering the full value of your underinsured motorist claim requires careful planning from the moment the accident occurs. Here are proven strategies that can significantly impact the outcome of your claim.

Document Everything From Day One

Start building your claim file immediately. Photograph the accident scene, your vehicle damage, and your visible injuries. Keep a daily journal documenting your pain levels, limitations, and emotional state. Save every medical bill, pharmacy receipt, and correspondence with insurance companies. The more comprehensive your documentation, the harder it is for your insurer to dispute the value of your claim.

Don’t Settle the Liability Claim Without Consulting an Attorney

As mentioned earlier, settling with the at-fault driver’s insurer without your UIM carrier’s consent can destroy your UIM claim. Before signing any release or accepting any settlement check, consult with a car accident attorney who can protect your right to pursue UIM benefits.

Obtain a Comprehensive Medical Evaluation

Insurance companies routinely minimize injuries they consider poorly documented. Ensure you receive thorough diagnostic testing and that your treating physicians provide detailed reports connecting your injuries to the accident. If your injuries require future treatment, get a written prognosis and life care plan from a qualified expert.

Calculate the Full Value of Your Damages

Don’t just add up your current medical bills. A proper damage calculation includes future medical expenses, lost earning capacity, diminished quality of life, pain and suffering, loss of consortium, and other non-economic damages. If you’re unsure how much your case is worth, an experienced attorney can provide a realistic assessment based on comparable cases and verdicts.

Explore All Available Coverage

UIM coverage may be available from sources you haven’t considered. Review policies covering other vehicles you own, policies held by household members, employer-provided auto policies, and umbrella policies. If you were a passenger in someone else’s vehicle, that vehicle’s UIM coverage may also apply. Maximizing all available sources can dramatically increase your total recovery.

Hire an Attorney Before Accepting Any Offer

Studies consistently show that accident victims represented by attorneys recover significantly more than those who handle claims on their own — even after fees. When dealing with a UIM claim against your own insurer, legal representation isn’t just helpful; it’s often essential. Your insurer has teams of adjusters, attorneys, and experts working to minimize your payout. You deserve someone on your side with equal expertise.

Why Is UIM Coverage Important Before an Accident Happens?

If you’re reading this article before you’ve been in an accident, consider this a wake-up call. The single most important thing you can do to protect yourself financially after a car accident is to purchase adequate underinsured and uninsured motorist coverage.

UIM coverage is remarkably affordable relative to the protection it provides. For most drivers, increasing UIM limits from the state minimum to $100,000 or $250,000 adds only a modest amount to their annual premium. Given that a single serious car accident can generate hundreds of thousands of dollars in medical bills, this small investment can mean the difference between financial security and devastation.

When purchasing UIM coverage, keep these tips in mind:

• Buy UIM limits that match your liability limits — if you carry $250,000 in liability coverage, carry $250,000 in UIM coverage
• Ask your insurer about stacking options if you have multiple vehicles
• Consider an umbrella policy that extends your UIM coverage beyond the limits of your auto policy
• Review your policy annually to ensure your coverage keeps pace with inflation and changes in your financial situation
• If your insurer refuses to offer UIM coverage or pressures you to decline it, that’s a red flag — shop for a new insurer

Frequently Asked Questions About Underinsured Motorist Claims

What is the difference between uninsured motorist (UM) and underinsured motorist (UIM) coverage?

Uninsured motorist (UM) coverage applies when the at-fault driver has no insurance at all. Underinsured motorist (UIM) coverage applies when the at-fault driver has insurance, but their policy limits are too low to cover your full damages. Some states combine UM and UIM into a single coverage, while others treat them separately. Both protect you against drivers who lack sufficient insurance, but they are triggered under different circumstances. Check your policy or consult with an attorney to understand what coverage you carry.

Can I file a UIM claim if the at-fault driver’s insurance covers some of my damages?

Yes. Underinsured motorist coverage is designed precisely for this situation. If the at-fault driver’s liability insurance pays you their full policy limits but those limits are less than your total damages, you can file a UIM claim with your own insurer to recover the difference — up to your UIM policy limits. You generally must exhaust the at-fault driver’s coverage first (collect their full policy limits) before your UIM coverage kicks in.

How long do I have to file an underinsured motorist claim?

The deadline depends on your state’s statute of limitations and your policy terms. In many states, the statute of limitations for contract-based claims (which is what a UIM claim is) ranges from three to six years, but some states impose shorter deadlines. Your policy may also contain notice requirements — for example, requiring you to notify your insurer of the accident within a certain number of days. Missing these deadlines can permanently forfeit your right to UIM benefits, so it’s crucial to act promptly and consult with an attorney as soon as possible after an accident.

What happens if my insurance company denies my UIM claim?

If your insurer denies your UIM claim, don’t accept the denial at face value. Request a detailed written explanation of the denial, including the specific policy provisions and facts they relied on. Many UIM claim denials are based on incorrect interpretations of policy language, disputed facts about the accident, or bad faith tactics. An experienced attorney can review the denial, assess whether it is legally justified, and pursue all available remedies — including filing a lawsuit for breach of contract and insurance bad faith if the denial was unwarranted.

Can I sue my own insurance company for bad faith in handling my UIM claim?

Yes, in most states. Your insurance company owes you a duty of good faith and fair dealing when handling your UIM claim. If they unreasonably deny your claim, delay processing, make a lowball settlement offer, or otherwise fail to treat your claim fairly, you may have grounds for a bad faith lawsuit. Bad faith claims can result in damages above and beyond your UIM policy limits, including compensation for emotional distress and, in some states, punitive damages intended to punish the insurer for egregious misconduct.

Should I hire an attorney for an underinsured motorist claim?

In most cases involving significant injuries, hiring an attorney is strongly recommended. UIM claims involve complex policy interpretation, coverage calculations, and negotiations against your own insurance company’s experienced adjusters and defense attorneys. An attorney can identify all available UIM coverage sources (including stacking opportunities), accurately calculate your damages, negotiate from a position of legal strength, and pursue arbitration or litigation if the insurer refuses to pay fairly. Most personal injury attorneys, including our firm, handle UIM claims on a contingency fee basis — meaning you pay nothing upfront and we only get paid if we recover money for you.

Take Action: Your Recovery Shouldn’t Be Limited by Someone Else’s Insurance

Being seriously injured by an underinsured driver is a uniquely frustrating experience. You did nothing wrong, yet you’re left dealing with mounting medical bills, lost income, and the physical and emotional toll of your injuries — all while an insurance company that you’ve paid premiums to for years tries to minimize your claim. You don’t have to face this fight alone.

Whether you’re just beginning the car insurance claims process after an accident, dealing with a lowball UIM offer, or facing a complete denial of benefits, Maxx Compensation can help. Attorney Charles C. Teale has the knowledge, resources, and determination to hold insurance companies accountable and secure the compensation you need to move forward with your life. Contact us today at 877-462-9952 to get started.