Underinsured motorist coverage in Arizona pays for your injury losses when the driver who hit you has liability insurance but not enough of it to cover your damages. It fills the gap between what the at-fault driver’s policy pays and what you actually lost, up to the UIM limit on your own policy. Because Arizona only requires drivers to carry $25,000 per person in bodily injury liability, a single surgery can exhaust the other driver’s coverage before you leave the hospital, and UIM is what stands between you and an uncompensated loss.
UIM Is Not the Same as UM
Uninsured motorist (UM) coverage and underinsured motorist (UIM) coverage solve two different problems. UM applies when the at-fault driver had no liability insurance at all, or when a hit-and-run driver can’t be identified. UIM applies when the at-fault driver did have insurance, but their limits fell short of your damages. Both pay for the same categories of loss: medical bills, lost wages, and pain and suffering.
Arizona treats these as separate coverages that don’t overlap. Your UIM won’t pay on a claim against an uninsured driver, and your UM won’t top up an underinsured driver’s payout. Filing under the wrong one can delay or derail your recovery, so identify which applies before you send notice.
Do You Actually Have UIM Coverage?
Every auto insurer doing business in Arizona has to offer both UM and UIM coverage in writing, on a form approved by the Department of Insurance, at limits at least as high as your bodily injury liability limits.1Arizona Legislature. Arizona Code 20-259.01 – Motor Vehicle Liability Policy If you carry 100/300 in liability, the insurer must offer you at least 100/300 in UIM.
You can reject UIM entirely or select lower limits, and that rejection stays in place until you request an increase in writing. Your declarations page is the final word on what you bought. Check it now, not after a crash. If you declined UIM years ago and want it back, you have to ask for it in writing.1Arizona Legislature. Arizona Code 20-259.01 – Motor Vehicle Liability Policy
If your insurer never made the required written offer, Arizona courts have generally held that UM and UIM coverage is read into the policy by operation of law at limits matching your bodily injury liability. That protection exists, but proving the insurer failed to make the offer is your burden.
UIM pays for bodily injury only. It doesn’t cover vehicle damage or other property losses. For property damage from an underinsured driver, you’d rely on your own collision coverage if you have it.
How Arizona Calculates Your UIM Payout
Arizona uses a “damages offset” approach. Your total damages are reduced by what the at-fault driver’s insurer paid, and your UIM insurer covers what’s left up to your full UIM limit. Your UIM limit itself is not reduced by the other driver’s coverage.
An example: you have $100,000 in UIM coverage, the at-fault driver carried the $25,000 state minimum, and your damages total $150,000.
- At-fault driver’s insurer pays their $25,000 limit.
- Remaining damages: $150,000 − $25,000 = $125,000.
- Your UIM insurer pays up to its $100,000 limit.
- Total recovery: $125,000. Uncompensated: $25,000.
Some states use a “difference in limits” method that would reduce your $100,000 UIM by the $25,000 the other driver paid, capping the UIM payout at $75,000. Arizona’s method preserves the full UIM limit and, in this example, puts an extra $25,000 in your pocket.
The Three Deadlines That Can End Your Claim
Arizona stacks three separate deadlines on a UIM claim. Miss any one and the claim can be gone regardless of how strong it is.
Two Years to Pursue the At-Fault Driver
You have to file a claim with the at-fault driver’s insurer or sue the at-fault driver within two years of the accident, which is Arizona’s general statute of limitations for personal injury.2Arizona Legislature. Arizona Code 12-542 – General Limitations on Actions This is the shortest and most commonly missed deadline in the sequence.
Three Years to Give Written Notice to Your Own Insurer
You must give your own insurer written notice that you intend to pursue a UIM claim within three years of the accident. If you didn’t know and had no reason to know the at-fault driver was underinsured, the three-year clock starts from the date you discovered that fact.3Arizona Legislature. Arizona Code 12-555 – Uninsured and Underinsured Motorist Coverage Claims Time Limits
Three Years to Arbitrate or Sue on the UIM Claim
If your UIM insurer doesn’t settle, you must request arbitration or file suit within three years of giving that written notice. Your insurer is required to remind you of this deadline in writing within two years of receiving your notice.3Arizona Legislature. Arizona Code 12-555 – Uninsured and Underinsured Motorist Coverage Claims Time Limits
How to File a UIM Claim
A UIM claim starts with the at-fault driver’s insurer, not your own. The steps run in order.
Exhaust the at-fault driver’s liability limits. In most cases this means negotiating a settlement for their full policy amount. If you accept less than the full policy limit, your UIM insurer may argue the other driver wasn’t actually underinsured, and you just settled for less than was available.
Notify your own insurer in writing before you accept the settlement. Your UIM insurer has subrogation rights, meaning they may pursue the at-fault driver to recover what they pay you. Settling with the other driver without notice can undermine those rights and give your insurer a reason to reduce or deny UIM benefits.
Submit the UIM claim with documentation. Provide medical records and bills, proof of lost income, and any evidence of ongoing impairment. Your insurer will evaluate the claim the way a liability insurer would, may request an independent medical examination, and will make an offer.
Arbitrate or sue if you can’t agree. Most UIM policies include an arbitration clause, and Arizona generally enforces those provisions. Arbitration usually moves faster than litigation, with limited appeal rights as the tradeoff. Where the policy doesn’t mandate arbitration, or the dispute is about coverage rather than damages, you may need to sue your own insurer.
Multiple Vehicles on One Policy
If you insure more than one vehicle, you can’t automatically combine the UIM limits from each into a single larger pool. When multiple policies or coverages purchased by one insured on different vehicles apply to the same accident, the insurer can restrict you to one policy or coverage for that claim. You get to choose which one, but you can’t stack them.1Arizona Legislature. Arizona Code 20-259.01 – Motor Vehicle Liability Policy If your policy doesn’t spell out your right to choose, your insurer must notify you of it in writing within 30 days of learning about the accident. Pick the policy with the highest UIM limit.
Mistakes That Cost UIM Claims
Settling with the at-fault driver too quickly. Accepting a settlement before you understand the full extent of your injuries locks in the “amount recovered” figure. If your injuries turn out worse than you thought, you may still be able to pursue UIM, but only if you preserved the claim properly and took the full policy limit.
Not notifying your own insurer early. Three years sounds generous, but the two-year deadline to pursue the at-fault driver runs at the same time. Send the UIM notice early, even before you know whether the other driver is underinsured. It costs nothing and preserves your rights.
Assuming you have UIM. UIM is optional in Arizona. If you or a prior policyholder on the account rejected it, you may have none. Verify on the declarations page before you need it.
Ignoring your own share of fault. Arizona follows pure comparative negligence. If you were partially at fault, your recovery is reduced by your percentage of responsibility.4Arizona Legislature. Arizona Code 12-2505 – Comparative Negligence On $100,000 in damages with 20% fault assigned to you, your compensable damages drop to $80,000, and both the at-fault driver’s payment and your UIM benefit are calculated against that reduced figure. Arizona never bars recovery entirely based on your own fault; even at 99% fault you can collect 1% of your damages.