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Types of Uninsured or Underinsured Motorist Coverage: What is it?

By Kevin Quinn

Navigating the roads without the right insurance can be risky, especially when accidents involve uninsured or underinsured motorists. Whether you’re facing a hit-and-run or an accident where the other driver is inadequately insured, knowing your insurance options is essential for protecting yourself from unforeseen financial burdens. This blog will help you understand the crucial aspects of uninsured motorist (UM) and underinsured motorist (UIM) coverage, ensuring you’re well-prepared for any scenario.

What Is Uninsured Motorist Coverage?

Uninsured motorist coverage (UM) is a type of auto insurance designed to protect drivers and passengers if they are involved in an accident with a motorist without insurance. This coverage ensures that you and your passengers can receive compensation for injuries and damages, even when the at-fault party can’t provide it due to a lack of insurance.

Typically, uninsured motorist coverage includes two components:

  • Uninsured motorist bodily injury (UMBI): This pays for reasonable medical expenses, pain and suffering, and loss of earnings from injuries to you and passengers that result from an accident.
  • Uninsured motorist property damage (UMPD): This part of the coverage pays for the repair or replacement of your vehicle if it’s damaged in an accident with an uninsured driver.

In many states, this type of insurance is mandatory. However, in states where it’s not required, it’s still highly recommended to opt for this coverage to safeguard against the unexpected costs that arise from accidents with uninsured motorists.

What Is Underinsured Motorist Coverage?

Underinsured motorist coverage (UIM) serves a similar purpose to uninsured motorist coverage, but it applies when the at-fault driver does have insurance, just not enough to cover all the damages caused by the accident. This type of coverage can make up the difference between what the at-fault driver’s insurance will pay and the total costs of your injuries and damages.

Here are the key components of underinsured motorist coverage:

  • Underinsured motorist bodily injury (UIMBI): This helps cover additional medical expenses, pain and suffering, and lost wages that exceed the at-fault driver’s policy limits. Like UMBI, it’s intended to ensure that you and your passengers are not left financially burdened by another driver’s insufficient coverage.
  • Underinsured motorist property damage (UIMPD): Similar to UMPD, this coverage pays for repairing or replacing your vehicle if it’s damaged in an accident with a driver whose insurance is inadequate to cover the full extent of the damage.

Uninsured Motorist Coverage Vs. Collision

Collision coverage is designed to cover damage to your vehicle that results from a collision, regardless of who’s at fault. This includes collisions with other vehicles or fixed objects like trees, poles, or buildings.

When selecting auto insurance, understanding the differences between uninsured motorist coverage and collision coverage is crucial for ensuring comprehensive protection on the road. Here are some key differences to consider:

  • Fault vs. no-fault: Uninsured motorist coverage is used when the other driver is at fault and does not have insurance. Collision coverage applies regardless of fault and can be used in any accident where your vehicle suffers damage from colliding with another object or vehicle.
  • Coverage limits: The policyholder typically sets uninsured motorist coverage limits and can equal but not exceed the limits of your standard liability coverage. Collision coverage limits depend solely on the actual cash value of your vehicle.
  • Deductibles: Collision coverage often comes with a deductible you’re responsible for paying out of pocket before your insurer pays the rest. Uninsured motorist coverage usually has no deductible, making it a preferable option for immediate, out-of-pocket expenses.

What Is a Collision Deductible Waiver?

When you purchase uninsured motorist property damage in conjunction with collision coverage, your uninsured motorist property damage coverage is referred to as collision deductible waiver and displayed on your policy as “CDW”. Collision coverage will pay for the damage to your vehicle (less the amount of your deductible), and when the loss is caused by an uninsured motorist, your collision deductible waiver coverage will reimburse or waive the deductible payment.

If the other driver does have insurance, but with coverage limits less than the damage to your car, you may have to rely on your collision coverage with collision deductible waiver or your uninsured motorist property damage coverage to pay the deductible or remaining balance of vehicle/property damage.

What About Hit-and-Run Accidents?

It’s important to know that uninsured coverage may not include hit-and-run accidents. For uninsured/underinsured motorist coverage to apply, insurance companies usually need to verify the identity of the driver involved (vehicle license plate) to determine whether they’re uninsured or underinsured. Without this information, only collision coverage would guarantee the policyholder’s vehicle would be repaired, and the insured would still be responsible for paying the associated deductible.

What If the At-Fault Driver Wants to Pay Out of Pocket?

If you’re involved in an accident and the at-fault driver wants to pay out of pocket, there are some considerations to take into account before agreeing to this arrangement:

  • Assessment of damages: Initial assessments can be misleading. What appears as minor damage to your vehicle might later reveal more serious, costly issues once a professional examines it. There’s also the potential for hidden injuries that don’t manifest until later, which could be much more expensive than anticipated.
  • Reliability of payment: There’s no guarantee that the at-fault driver will follow through with the payment once you’ve agreed to settle the matter privately. Without formal documentation or legal obligations, you may have to pay out of pocket if they back out of the agreement.

That’s why it’s best to know how to report an accident to insurance. Your insurer can provide support and guidance through the claims process, ensuring you get the coverage you need to get back on the road.


Having adequate coverage can save you from significant financial distress in the event of an accident. Seeking reliable auto insurance quotes that offer a blend of these essential coverages tailored to meet your specific needs can provide peace of mind while navigating the roads. To explore your options and secure a policy that suits your requirements, contact Mercury today and get your personalized auto insurance quote.

Contact us today for a fast, free quote!

Kevin Quinn

VP, Claims at Mercury Insurance

Kevin Quinn is Vice President of Claims for Mercury Insurance, where he leads auto claims adjusting nationally. Quinn has been with Mercury since 2015 and has been in the industry – starting as a claims adjuster – for more than 20 years. Quinn received his undergraduate degree in Business Administration from New York Institute of Technology and also holds a Juris Doctor degree from California Western School of Law.

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