what is Underinsured Motorist Coverage, with example?

Underinsured Motorist Coverage


Earlier, we stated that a vehicle with liability insurance in an amount equal to or greater than the state’s financial responsibility limit is not considered an uninsured vehicle under uninsured motorists coverage. 

This financial responsibility limit, however, often falls far short of fully reimbursing the insured for a loss.

 Underinsured motorists coverage fills this gap. 

In general terms, underinsured motorists coverage pays the difference between the insured’s actual damages for bodily injury and the amount of liability insurance carried by the driver who was at fault, up to the limits of the insured’s underinsured motorists coverage.

Underinsured motorists coverage is subject to state law, being mandatory in some states and optional in others. It is added to the personal auto policy by endorsement.

Suppose the insured, who carries $100,000 of underinsured motorists coverage, is involved in an auto accident. 
The other driver, who was at fault, carries the state’s required limit of $50,000 of auto liability insurance. 
The named insured’s damages for bodily injury are $65,000. 
The insured’s underinsured motorists coverage will pay $15,000 for this loss ($65,000 less the $50,000 limit of the at-fault driver’s 

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top