Underinsured Motorist (UIM) coverage pays the difference between which two limits?

Underinsured Motorist (UIM) coverage is designed to protect policyholders when they are involved in an accident with a driver whose insurance coverage is insufficient to fully cover the damages they have suffered. The correct answer reflects the key function of UIM coverage by stating that it pays the difference between the insured's UIM limits and the at-fault driver's insurance bodily injury limits.

When a person is injured in an accident and the at-fault driver has lower bodily injury limits than the UIM coverage purchased by the injured party, the UIM coverage steps in to cover the gap. For instance, if the at-fault driver has a bodily injury limit of $25,000 but the injured party has UIM limits of $50,000, the UIM coverage would provide an additional $25,000 to ensure that the insured is compensated up to their policy limit.

This coverage is crucial as it allows individuals to access the financial support they need for medical expenses, lost wages, and pain and suffering beyond what the at-fault driver's insurance can provide. Understanding this function is essential for both awareness of coverage and effective financial planning in the event of an accident.