How Does Underinsured Motorist Coverage Work in California?

Underinsured motorist coverage, usually shortened to UIM, answers a narrow question: the driver who hurt you had insurance, but not enough. In California the answer is narrower than the name suggests, because the law defines "underinsured" by comparing their policy with yours, not with the size of your injury.

The definition that decides everything

Under Insurance Code section 11580.2, an underinsured motor vehicle is one that is insured, but for an amount less than the uninsured motorist limits carried on the injured person's vehicle. Your own limit is the yardstick. If the other driver carries the same limit you do, their car is not underinsured as far as your policy is concerned, however serious the injury.

When it starts to pay

UIM waits its turn. The statute says it does not apply until the bodily injury limits of every insured vehicle that caused the injury have been used up by judgments or settlements, and proof of that payment has gone to your insurer. Only then does your own coverage step in.

How much it can pay

The ceiling is your UIM limit minus the amount paid by or for anyone legally liable for the injury. This is the offset that surprises people. UIM in California is not an extra layer stacked on top of the other driver's policy. It tops the payment up to your own limit, and no further.

A worked example, limits only

You carry UM and UIM of $100,000 per person. The at-fault driver carries the California minimum of $30,000 per person. Your injury claim is worth more than both.

1. The other driver's insurer pays its full $30,000 per-person limit.
2. You send proof of that payment to your own insurer, having obtained its written consent before settling.
3. Your UIM can pay up to $70,000: your $100,000 limit less the $30,000 already paid.

Now change one number. If you had chosen UM and UIM of $30,000 per person, matching the other driver, the other car would not count as underinsured at all and your UIM would pay nothing. The coverage would be on your declarations page and still be worth zero in this accident.

Things that can shrink or end a UIM claim

• Settling without consent. Section 11580.2 lets the coverage fall away if you settle with, or take to judgment, a liable party without your insurer's written consent.
• Offsets. A policy may reduce what it owes by amounts paid under your medical payments coverage, and by workers' compensation benefits if the crash happened on the job.
• The clock. Within two years of the accident, one of three things must have happened: a lawsuit filed against the at-fault driver, an agreement on the amount owed, or arbitration demanded in writing by certified mail.

Do you already have it?

Probably, if you carry uninsured motorist coverage. The statute has required UIM in every policy that includes UM since July 1, 1985. The real question is the limit, since the limit is the only thing that makes UIM useful.

A practical rule of thumb: UIM only earns its place when your limit sits comfortably above what other drivers commonly carry. If yours equals the state minimum, it protects you against almost nobody. To see what a higher UM and UIM limit would look like on your own policy, request a quote with two limit options.