The purpose behind UM/UIM coverage is to protect your financial interests in the event of an accident with a vehicle that is either uninsured, or has insufficient coverage to fully compensate for the damages caused.
To explain, consider the following example: You are driving home from work when suddenly a car coming in the opposite direction crosses the yellow lines and hits you head on. Fortunately you and the other driver are alive, but your car is totaled and your injuries are significant, necessitating tens of thousands of dollars in medical treatment. An investigation by the responding police officer reveals that the other driver was texting while driving, leading him to cross into your lane. You decide to retain a lawyer who promptly puts the other driver, and the insurance carrier on notice. A review of the other driver's insurance policy reveals that he carried only the minimum coverage of $20,000.00, which isn't even enough to cover your initial hospital stay, let alone the months of follow up treatment and potential surgeries in the future. Further investigation reveals that the other driver is unemployed, does not own any property and has no significant assets.
If you are also carrying minimum UM/UIM coverage of $20,000.00 then unfortunately, your sole compensation would likely be the $20,000.00 from the other driver's policy, and you would be left paying your medical expenses on your own. However, carrying higher UM/UIM coverage allows you to make a claim under your own policy for compensation in addition to the $20,000.00 from the other driver's policy. In this example, if you carried UM/UIM coverage of $100,000.00 you could potentially recover the $20,000.00 from the other driver's policy, and make a claim for an additional $80,000.00 from your own UM/UIM policy for a combined total of $100,000.00. If your coverage was $150,000.00 you could again get the $20,000.00 from the other driver, and make claim for up to another $130,000.00 from your UM/UIM policy for a total of $150,000.00. Obviously the amount of compensation you recover would be dependent upon the circumstances of the case and the damages caused by the other driver.
Given the uncertainty on our roadways, you have to make sure your interests are protected. Keeping a lower coverage amount may keep your premium down, but may also come back to haunt you should disaster strike.