A client has a Personal Auto Policy (PAP) with Underinsured Motorist (UIM) Bodily Injury limits of $100,000 per person / $300,000 per accident. They are involved in an accident with an at-fault driver who has liability limits of $50,000 per person / $100,000 per accident. The client sustains $120,000 in bodily injuries. How much will the client's UIM coverage pay?

Correct answer: A. $70,000

UIM coverage typically pays the difference between the insured's UIM limit and the at-fault driver's bodily injury liability limit, up to the insured's damages. The client's UIM per-person limit is $100,000. The at-fault driver's per-person limit is $50,000. The client's damages are $120,000. UIM will pay ($100,000 UIM limit - $50,000 at-fault driver's limit) = $50,000. However, some states use the 'damages minus liability' approach. In most states, UIM pays the difference between the UIM limit and what the at-fault driver's policy paid, or the difference between the UIM limit and the actual damages, whichever is less, after considering the at-fault driver's payment. The UIM payout is the lesser of: (1) the difference between the insured's damages and the at-fault driver's payment ($120,000 - $50,000 = $70,000) OR (2) the difference between the insured's UIM limit and the at-fault driver's limit ($100,000 - $50,000 = $50,000). The most common 'gap' method is UIM limit minus at-fault driver's limit. So, $100,000 (UIM limit) - $50,000 (at-fault driver's limit) = $50,000. However, the question implies the UIM coverage is *triggered* when the at-fault driver's limits are *less than* the insured's damages, and then pays the *shortfall* up to the insured's UIM limit. The client has $120,000 in injuries. The at-fault driver's policy pays its maximum per-person limit of $50,000. The remaining unpaid damages are $120,000 - $50,000 = $70,000. Since this $70,000 is less than the client's UIM per-person limit of $100,000, the UIM coverage will pay $70,000.