Uninsured vs. Underinsured Motorist Coverage in Alabama

By the FigureMyTax Editorial Team · How we calculate

Alabama uses one coverage for both: a vehicle counts as "uninsured" if it has no liability insurance, if its limits are below the statutory minimum, if its insurer is insolvent, or if all liability limits available to you total less than your damages.

Four situations that count as uninsured

Under Ala. Code 32-7-23(b), the term uninsured motor vehicle includes, but is not limited to, vehicles where: (1) neither the owner nor the operator carries bodily injury liability insurance; (2) the applicable bodily injury limits are below the minimum required by 32-7-6; (3) the insurer becomes insolvent after the policy is issued; and (4) the sum of all bodily injury liability bonds and policies available to you is less than the damages you are legally entitled to recover.

Where the "underinsured" driver fits

Situation (4) is what most people mean by an underinsured driver. If the at-fault driver has a $25,000 policy and your damages are $100,000, the available limits are less than your damages, so the vehicle is treated as uninsured and your UM coverage can respond to the difference.

What the coverage pays

It protects persons insured under the policy who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death. It does not replace your own liability coverage and it pays only what you could legally recover from the at-fault driver.

You can reject it, and renewals matter

The named insured has the right to reject the coverage, and a rejected coverage need not be provided in a renewal policy unless the named insured requests it in writing. Check your declarations page before you assume you are covered.

How stacking fits in

Whichever of the four situations applies, the amount available is capped by the stacking rule in subsection (c): the primary coverage plus no more than two additional coverages in one contract. Stacked versus unstacked coverage shows the arithmetic, the statute post covers the legal limits, and the calculator applies both to your claim.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Alabama's rules apply to your specific case with a licensed Alabama attorney.