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What’s the Difference Between Underinsured and Uninsured Coverage?

Learn how these two similar-sounding protections address very different gaps in other drivers’ insurance

Uninsured and underinsured motorist coverages both exist to protect you from the financial consequences of another driver’s poor insurance choices. But while they’re often mentioned together, they serve distinct purposes—and not all policies include both.

Understanding how they differ helps you avoid surprise shortfalls after an accident. This matters when you’re deciding how much coverage you really need and what risks your current policy does or doesn’t address. You might think about this the next time you compare quotes or review your limits with your insurer.

Uninsured vs. Underinsured: What’s the Core Difference?

The key distinction lies in whether the at-fault driver has any insurance—or just not enough.

  • Uninsured motorist coverage pays when the at-fault driver has no insurance at all. This includes hit-and-run drivers who can’t be identified.

  • Underinsured motorist coverage kicks in when the other driver does have insurance, but their policy limits aren’t enough to cover the full cost of your injuries or losses.

Coverage Type When It Applies What It Covers
Uninsured motorist Driver has no insurance or flees the scene Your medical bills, pain and suffering, lost wages
Underinsured motorist Driver has some insurance, but not enough to cover your costs The gap between their limit and your actual losses
 
 Note: In Canada, uninsured motorist coverage is mandatory in most provinces, while underinsured coverage is sometimes optional or bundled under a different name.

Imagine you’re injured in an accident and your medical bills and lost wages total $500,000. If the at-fault driver has $200,000 in liability coverage:

  • Your underinsured motorist coverage could pay the remaining $300,000 (up to your policy’s limit).

  • If they had no insurance at all—or if it was a hit-and-run—your uninsured motorist coverage would step in.

Tip: You can only carry underinsured or uninsured coverage up to the limit of your liability insurance. If you want $1 million of protection, your liability limit must also be at least $1 million.

Why You Might Need Both

Even though uninsured drivers are less common in Canada due to legal requirements, underinsured drivers are still widespread. Many carry only the provincial minimum—often far below what’s needed in a serious accident.

You may want to consider both if:

  • You drive frequently or in high-traffic areas
    The more you’re on the road, the higher the chance of encountering an underinsured or uninsured driver.

  • You have dependents or passengers
    If more than one person is injured, costs can escalate quickly.

  • You want more control over your recovery
    These coverages allow you to access compensation without relying entirely on another driver’s insurer.

Caution: Not all policies automatically include underinsured coverage. Be sure to check with your insurer and request it if needed.

Two Coverages, One Goal: Protecting You

Uninsured and underinsured motorist coverages both protect you from financial fallout caused by other drivers’ insufficient insurance. While uninsured coverage addresses drivers who offer nothing, underinsured fills the gap when their coverage falls short. Together, they ensure your care and compensation aren’t limited by someone else’s poor choices.