Picture this: You’re stopped at a red light, minding your own business, when another driver rear-ends your car. The damage is significant—and so are the medical bills. But when you check the other driver’s insurance, you discover it barely covers a fraction of your costs. This is where underinsured motorist coverage comes to the rescue, and in 2025, it’s more relevant than ever for Australians.
What Is Underinsured Motorist Coverage?
Underinsured motorist coverage (UIM) is designed to protect you when you’re involved in an accident with a driver whose insurance isn’t enough to cover your losses. While compulsory third party (CTP) insurance is mandatory in Australia, it only covers liability for injuries to others—not property damage, and not always for the full scope of medical costs. With accident-related expenses climbing and more drivers opting for basic cover, UIM is fast becoming a critical financial buffer.
- Protection beyond CTP: UIM steps in where the other driver’s insurance falls short, paying for your medical bills, lost wages, and sometimes vehicle repairs.
- Applies to hit-and-run incidents: If the at-fault driver can’t be identified or is uninsured, UIM can provide essential cover.
- Optional add-on: UIM is typically available as an optional extra with comprehensive or third party property insurance policies.
2025 Trends: Why the Need for UIM Is Growing
Several developments in 2025 are making underinsured motorist coverage especially important for Australians:
- Rising medical and repair costs: The average cost of a car accident injury claim has jumped by over 12% since 2023, driven by inflation and advances in medical technology.
- Increase in basic cover policies: More Australians are choosing minimal insurance to save on premiums, meaning a higher risk of encountering an underinsured driver on the road.
- Electric vehicle (EV) repairs: With EV sales surging, repair costs for these vehicles are higher than for traditional cars, making underinsurance gaps even more significant.
- Policy updates: In NSW and Queensland, 2025 regulatory changes have prompted insurers to clarify UIM offerings and streamline claims for policyholders hit by underinsured motorists.
Case in point: In February 2025, a Sydney driver faced $28,000 in medical and car repair costs after being hit by a motorist with only basic CTP. Thanks to UIM, she recovered the shortfall her insurer couldn’t collect from the at-fault driver.
How to Make Underinsured Motorist Coverage Work for You
Getting the most from underinsured motorist coverage isn’t just about adding it to your policy—it’s about understanding the fine print and matching your cover to your risk profile. Here’s how:
- Review your current policy: Not all insurers offer UIM as standard. Check your product disclosure statement (PDS) or ask your provider if you’re unsure.
- Assess your exposure: Do you drive in areas with high accident rates, or where hit-and-run incidents are common? Do you own a newer or more expensive vehicle?
- Choose adequate limits: Some policies cap UIM payouts at $200,000, but with medical and repair costs rising, consider opting for higher limits if available.
- Understand the claims process: Insurers now offer digital claim lodgement and fast-tracking for UIM claims—a direct response to customer demand in 2025.
Pro tip: Bundling UIM with your comprehensive cover often qualifies you for multi-policy discounts, keeping your premiums competitive.
The Bottom Line: Don’t Let Gaps in Others’ Cover Cost You
With more drivers underinsured and accident costs at record highs, underinsured motorist coverage is no longer just a nice-to-have. It’s an essential part of a smart financial safety net for every Australian motorist. As insurance offerings evolve in 2025, now is the time to review your policy and ensure you’re protected—no matter who’s at fault on the road.
