Underinsured Motorist Coverage is designed to pay the difference in which scenario?

Underinsured Motorist Coverage is specifically designed to address the situation where the other driver, who is at fault in an accident, has liability insurance that is insufficient to cover the damages resulting from the accident. This type of coverage kicks in when the damages you incur—whether for medical expenses, lost wages, or pain and suffering—exceed the limits of the at-fault driver’s liability policy.

For instance, if you suffer $50,000 in damages from an accident caused by another driver, but that driver only has $25,000 of liability coverage, Underinsured Motorist Coverage would step in to pay the remaining $25,000, thus bridging the gap caused by inadequate insurance coverage from the other motorist.

This function is critical for ensuring that victims of accidents can fully recover their losses, even when the responsible party does not carry sufficient insurance. The other choices do not align with the purpose of Underinsured Motorist Coverage, as they pertain to different aspects of auto insurance and liability situations.