6.4 Part C Uninsured/Underinsured Motorists

What Part C Covers

Part C — Uninsured Motorists Coverage (UM) pays compensatory damages an insured is legally entitled to recover for bodily injury caused by the owner or operator of an uninsured motor vehicle. Although Part C is a first-party coverage (the insured collects from their own insurer), it is fault-based: the insured must show that the other driver was legally liable and prove the damages, exactly as if suing that driver.

An uninsured motor vehicle includes a vehicle with no liability insurance, a vehicle whose insurer denies coverage or becomes insolvent, and a hit-and-run vehicle whose owner or driver cannot be identified.

UM vs. UIM — the Trigger Difference

UIM fills the gap between the at-fault driver's inadequate limit and the insured's own UIM limit. It does not stack on top without limit — the recovery is coordinated, as shown below.

Trap: A driver with the state-minimum limit is still insured, so UM does not apply — if their limit is too low for the injuries, the correct coverage is UIM, not UM.

Hit-and-Run and UM Property Damage

For a UM bodily injury claim arising from a hit-and-run, the insured must report promptly and cooperate; the identity of the at-fault driver is unknown but the claim still proceeds against the insured's own UM coverage.

Many states also offer Uninsured Motorist Property Damage (UMPD), which pays for damage to the insured's vehicle caused by an uninsured driver, often subject to a small deductible (frequently $200 to $250). Some states require actual physical contact with the phantom vehicle for a UMPD hit-and-run claim, to deter staged single-car losses. Where physical-damage Collision coverage already exists, UMPD may be redundant, so it is most valuable to insureds without Collision.

UM, UIM, and the Trigger Difference

Uninsured Motorists (UM) responds when the at-fault driver has no liability insurance, is a hit-and-run phantom, or is insured by an insurer that becomes insolvent. Underinsured Motorists (UIM) responds when the at-fault driver has insurance but less than the insured's damages. The trigger difference is the exam's favorite point: UM = no coverage; UIM = not enough coverage. Both cover bodily injury to the insured caused by another's negligence; UM Property Damage is optional and varies by state (sometimes carrying its own small deductible).

Worked UIM Offset and Stacking

Assume the insured carries $100,000 UIM. The at-fault driver carries only $25,000 liability and the insured's proven damages are $80,000. Under the common "difference-in-limits" (offset) approach, UIM pays the insured's limit minus the other driver's limit available: $100,000 - $25,000 = up to $75,000, and the insured collects $25,000 (liability) + $55,000 (UIM) = $80,000 total, fully indemnified.

Stacking lets an insured combine UM/UIM limits across multiple owned vehicles or policies where state law allows; many states permit a written rejection of UM/UIM or anti-stacking provisions, which is why a producer must document the insured's coverage election.

Worked UIM Offset Example

UIM recovery is coordinated with what the at-fault driver pays. Under the common difference-in-limits / offset approach, the at-fault driver's payment is subtracted from the insured's UIM limit.

Facts: insured's UIM limit = $100,000; insured's damages = $90,000; at-fault driver's liability limit = $25,000.

1. At-fault driver's insurer pays the insured $25,000 (its per-person limit).
2. The insured's UIM limit is $100,000; the offset subtracts the $25,000 already received.
3. UIM pays the remaining proven damages: $90,000 total damages − $25,000 already paid = $65,000.
4. Total recovery to the insured = $25,000 + $65,000 = $90,000 (full damages, capped at the $100,000 UIM limit).

Trap: If damages had been $130,000, the insured would receive $25,000 from the at-fault driver plus $75,000 from UIM ($100,000 UIM limit − $25,000 offset), for $100,000 total — the excess $30,000 is uninsured.

Limits, Stacking, and Rejection

UM/UIM limits are usually offered equal to the insured's Part A liability limit unless the insured selects a lower amount or rejects the coverage in writing. Many states mandate a written rejection or reduced-limit selection because UM/UIM is consumer-protective; absent a valid rejection, the coverage may default to the liability limit by operation of law.

Some states permit stacking — adding the UM/UIM limits of multiple vehicles or policies — while others prohibit it through anti-stacking language. Because UM/UIM is fault-based, the insurer steps into the position of the negligent driver and may dispute liability and damages; disagreements are commonly resolved by arbitration under the policy's UM provisions.

Comparing the Injury Coverages