UNDERINSURED MOTORISTS 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.