Illinois Uninsured Motorist Coverage: Limits, Claims, Arbitration

In Illinois, uninsured motorist coverage is built into every auto insurance policy by law, with minimum bodily injury limits of $25,000 per person and $50,000 per accident.¹ You cannot opt out of that floor. Insurers must also offer property damage protection against uninsured drivers, and once your UM limits rise above the state minimum, underinsured motorist coverage kicks in at matching amounts.²

What’s Mandatory and What’s Optional

Under the Illinois Insurance Code, no auto policy can be issued or renewed in the state without uninsured motorist bodily injury coverage. The statute reaches any vehicle designed for public roads that’s either registered in Illinois or primarily kept here.¹ The mandatory minimums mirror the state’s liability floor: $25,000 for one person’s injuries and $50,000 in total when more than one person is hurt in the same crash.³

The Vehicle Code separately requires that every liability policy comply with the UM and underinsured provisions of the Insurance Code, tying the two frameworks together.⁴

You cannot reject the statutory minimum. You can, however, decline additional UM coverage above the floor if your policy carries higher limits, provided you’re a named insured or applicant.²

Uninsured Motorist Bodily Injury

The $25,000/$50,000 numbers are a floor, not a ceiling, and insurers sell higher limits for additional premium.⁵ A single hospital stay after a serious crash can exceed $25,000 quickly, so drivers with assets to protect often carry more.

Uninsured Motorist Property Damage

Illinois insurers must offer uninsured motorist property damage coverage for private passenger and recreational vehicles. When an identified uninsured driver hits your car, this pays up to your vehicle’s actual cash value or the policy limit, whichever is less. The maximum deductible allowed is $250.¹

UMPD is offered, not automatic. You choose whether to buy it. Drivers who already carry collision coverage get overlapping protection, since collision pays for accident damage regardless of fault. Drivers who skip collision but still want a backstop against uninsured drivers are the ones for whom UMPD does the most work.

Underinsured Motorist Coverage

Once your UM limits exceed the state minimum, Illinois law requires the policy to include underinsured motorist coverage in an amount equal to the UM total.² A vehicle counts as “underinsured” when the at-fault driver’s liability limits fall below your UIM figure. Your insurer pays the gap between what the other policy covers and what your UIM limit provides. Raising your UM limits automatically raises your underinsured protection along with it.

When UM Coverage Applies

UM coverage answers the situation drivers worry about most: the other driver has no insurance, or worse, no name. The statute expressly covers hit-and-run crashes. If an unidentified driver injures you and flees, your UM bodily injury coverage applies.¹ The same reach extends to property damage on the vehicle listed in your policy, if you carry UMPD.⁶

File a police report right away in any hit-and-run. Documentation of the incident typically supports the claim, since without an identified driver, the insurer has no other way to confirm the other party was uninsured.

Where the Coverage Stops

Three limits catch Illinois drivers off guard because they cut against reasonable assumptions.

No Stacking Across Vehicles or Policies

Illinois law prohibits stacking UM limits. If you insure three vehicles on one policy, you cannot combine those three UM amounts into a single larger pool after a crash. The statute states that limits on one vehicle may not be aggregated with similar coverage on other vehicles for the same accident, whether the other coverage is with the same insurer or a different one.¹ Courts have generally enforced clear anti-stacking language, though ambiguous policy wording has produced different outcomes in some cases.

Unlisted Household Vehicles

UM benefits do not apply if you’re injured in a vehicle owned by you, your resident spouse, or a resident relative when that vehicle is not listed on the policy under which you’re claiming. Newly acquired or replacement vehicles that qualify under the policy’s terms are the exception.¹ A household with two cars on two different policies needs to remember which policy covers which car; an accident in the wrong one won’t trigger UM benefits from the other.

Rideshare and Livery Use

Standard personal auto policies typically exclude UM, underinsured, medical payments, and physical damage coverage when the vehicle is being used as a public or livery conveyance. If you drive for a rideshare platform, your personal UM coverage likely drops off the moment you log in to accept rides, whether or not a passenger is on board. Confirm whether your platform provides gap coverage, or ask your insurer about a commercial endorsement.

Filing a UM Claim

A UM claim is filed against your own insurance company, not the other driver’s, so the relationship with your insurer drives the process. Notify the company promptly. Delays can create problems even when you’re well inside the statute of limitations for a lawsuit.

Gather documentation early. A police report matters most, especially in hit-and-run situations where you need to establish that the other driver was uninsured or unidentified. Medical records, bills, wage documentation for missed work, and photos of the damage all support the claim.

Illinois gives you two years from the date of the crash to file a personal injury lawsuit, and that window frames UM claims as well. Your policy almost certainly imposes its own shorter deadlines for reporting the accident and submitting a formal claim. Read the policy for those timelines rather than relying on the two-year litigation clock alone.

Your insurer must handle the claim in good faith. If the process stalls or you receive a low offer, the statute channels the dispute into arbitration rather than a courtroom fight.

How Arbitration Works in UM Disputes

Illinois requires arbitration for UM disputes. Every UM policy issued in the state must include a provision sending coverage and damages disagreements to the American Arbitration Association under its rules.¹

The statute provides a second track as well. Either party can trigger a three-arbitrator panel: each side picks one arbitrator, and those two choose a third. If the arbitrators aren’t chosen within 45 days, either party can move the dispute to the AAA instead.¹

One rule matters in larger claims. When the amount sought exceeds the Section 7-203 minimums, the arbitration must follow circuit court rules of evidence for medical opinions instead of the more relaxed AAA rules. Below those thresholds, AAA rules apply throughout. The arbitrator’s decision is binding, which means faster resolution but limited appeal rights.

Are UM Settlement Proceeds Taxable

Federal tax law generally excludes from income any damages received for personal physical injuries or physical sickness, whether through a settlement or a judgment. That exclusion covers compensation for medical expenses, pain and suffering, and lost wages when those losses arise from a physical injury.⁷

The line runs between physical and non-physical harm. If your UM claim pays for a broken leg, the surgery, and wages you lost during recovery, none of that is taxable. Emotional distress that isn’t tied to a physical injury does not qualify for the exclusion, though you can still exclude emotional distress damages up to the amount you actually paid for related medical care.⁷

Punitive damages are always taxable, whatever the underlying claim. Most UM settlements are compensatory damages for physical injuries and fall inside the tax-free category, but if any portion of yours covers non-physical harm, consider running the allocation past a tax professional before you file.

1
Illinois General Assembly. Illinois Code 215 ILCS 5/143a
2
Illinois General Assembly. Illinois Code 215 ILCS 5/143a-2 – Additional Uninsured Motor Vehicle Coverage
3
Illinois General Assembly. Illinois Code 625 ILCS 5/7-203
4
FindLaw. Illinois Code 625 ILCS 5/7-601 – Required Liability Insurance Policy
5
Illinois Department of Insurance. Auto Insurance Shopping Guide
6
Illinois Department of Insurance. Auto Insurance Definitions
7
Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness