Study guide
5.4 Part C: Uninsured/Underinsured Motorists
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
5.4 Part C: Uninsured/Underinsured Motorists
Key Takeaways Explain This Topic AI
Uninsured Motorist (UM) coverage pays for bodily injury when the at-fault driver has NO insurance, is a hit-and-run driver, or has an insolvent insurer
Underinsured Motorist (UIM) coverage pays when the at-fault driver's liability limit is less than the injured insured's damages
UM/UIM responds only when the OTHER driver is legally liable; it does not pay if the insured is at fault
Most states require the insurer to OFFER UM, and many require the insured to reject it in writing; UM/UIM limits usually mirror the insured's liability limits
Roughly 15% of U.S. drivers are uninsured (Insurance Research Council, 2023), and stacking and consent-to-settle rules vary widely by state
Last updated: June 2026
The Problem Part C Solves
Even with mandatory insurance laws, many at-fault drivers cannot pay. The Insurance Research Council (2023) found about 15% of U.S. drivers are uninsured , and roughly one in three are uninsured or underinsured. Part C — Uninsured Motorists Coverage is first-party protection that steps into the at-fault party's shoes: it pays the insured the BI damages the insured would have collected from a responsible driver who has no or too little insurance.
The critical gate: the other driver must be legally liable. Part C never pays when the insured is the at-fault party.
Uninsured Motorist (UM)
UM pays bodily injury caused by:
- A driver carrying no liability insurance
- A hit-and-run driver (a "phantom" or unidentified vehicle)
- A driver whose insurer is insolvent
Worked example — $100,000 UM:
- Your damages At-fault driver's coverage UM pays
- $75,000 $0 (uninsured) $75,000
- $150,000 $0 (uninsured) $100,000 (limit)
- Hit-and-Run Rules
Many states require physical contact between the phantom vehicle and the insured (or the insured's vehicle) before UM applies; others allow a no-contact claim with independent corroboration from a witness. A prompt police report , usually within 24 hours, is generally required.
Underinsured Motorist (UIM)
UIM applies when the at-fault driver has insurance, but the limit is less than the insured's damages . The two main calculation approaches are heavily tested:
Method How UIM is computed $100K UIM, $25K at-fault, $80K damages
Difference (reduction) method UIM limit minus the at-fault driver's payment $100K − $25K = $75K available; pays $55K to reach $80K
Add-on (excess) method Full UIM limit sits on top of the at-fault payment $25K + up to $100K UIM, less in some states
Difference-method example, severe injury:
- Your damages At-fault pays UIM pays Total recovery
- $150,000 $25,000 $75,000 ($100K − $25K) $100,000
Notice the difference method caps total recovery at the UIM limit, while the add-on method can exceed it.
UM vs. UIM
- Feature UM UIM
- Trigger No insurance Insufficient insurance
- Hit-and-run / phantom vehicle Yes No
- Insurer insolvent Yes No
- Damages covered Bodily injury (UMPD in some states) Bodily injury
- Who Is Covered
The same circle as elsewhere: the named insured and resident family members in any auto, plus other persons occupying the covered auto, and anyone legally entitled to recover because of injury to one of those persons.
Limits, Stacking, and Settlement Rules
Most states require insurers to offer UM/UIM at limits equal to the liability limits; the applicant must usually reject or reduce it in writing . Limits commonly mirror the policy's liability limits (100/300 liability → 100/300 UM/UIM).
Stacking — where allowed, an insured with multiple covered autos can combine the per-vehicle UM limits (two cars at $100,000 each → $200,000 of UM). Many policies and states prohibit stacking with an anti-stacking clause.
Consent to settle — the insured generally must get the UM/UIM insurer's consent before settling with the at-fault driver, or risk losing the insurer's subrogation rights and the UM/UIM claim.
Arbitration — many UM/UIM disputes are resolved by binding arbitration rather than litigation.
Part C Exclusions (Highlights)
UM/UIM does not apply when the insured uses a vehicle without reasonable belief of permission, when bodily injury is covered by workers' compensation, or when the insured settles with the at-fault party without the insurer's consent and thereby impairs subrogation.
UMPD and the Collision Overlap
In some states UM also includes Uninsured Motorist Property Damage (UMPD) , which pays to repair the insured's vehicle when an uninsured at-fault driver damages it. Where UMPD exists it usually carries a small deductible (often around $200–$250 ) and is useful for an insured who carries no Collision coverage. An insured who DOES carry Collision may prefer to collect under Part D and let the insurer subrogate, because Collision pays regardless of whether the at-fault driver is ever identified. Watch the wording: UM bodily injury and UMPD are separate elections, and not every state offers the property-damage piece.
Reading a UM/UIM Limit
UM/UIM limits use the same split-limit grammar as Part A. A driver with 100/300 liability who accepts matching UM/UIM has $100,000 per person / $300,000 per accident of uninsured-motorist protection. Because the coverage protects the insured's own family, advisors often argue UM/UIM limits should be set at least as high as the liability limits — the people most likely to ride in the insured's car are the insured's own family, and they are the ones UM/UIM protects.
Worked UIM Add-On Comparison
Consider $80,000 in proven damages, an at-fault driver with a $25,000 limit, and the insured carrying $100,000 UIM. Under the difference method , the most UIM can provide is $100,000 − $25,000 = $75,000, and it pays $55,000 to bring the insured to the $80,000 of damages. Under a true add-on method , the insured could in some states keep the at-fault $25,000 and still draw on the full UIM limit, recovering more than $80,000 only up to actual damages — UM/UIM is not a windfall and is capped at the insured's real loss.
Notice, Cooperation, and Time Limits
Part C claims are subject to the policy's Part E duties : prompt notice, cooperation, submission to medical exams, and proof of claim. Hit-and-run claims generally require a police report within 24 hours and prompt notice to the insurer. Failing to report a phantom-vehicle crash quickly is a common reason UM claims are denied, so the exam rewards candidates who connect Part C triggers to the Part E procedural duties.
Exam anchor: UM = no insurance (and hit-and-run); UIM = some insurance, but not enough.