A client is involved in an auto accident with a driver who has a liability policy with limits of $25,000 per person / $50,000 per accident. The client sustains $40,000 in bodily injuries. Their own policy has Underinsured Motorist (UIM) Bodily Injury coverage with limits of $100,000 per person / $300,000 per accident. How much will the client's UIM coverage pay?
- A$40,000
- B$25,000
- C$15,000
- D$0
Show answer & explanationAnswer & explanation
Correct answer: C. $15,000
Underinsured Motorist (UIM) coverage pays when the at-fault driver's liability limits are insufficient to cover the insured's damages. The UIM coverage typically pays the difference between the insured's damages and what the at-fault driver's policy pays, up to the insured's UIM limit. Here, the client's damages are $40,000. The at-fault driver's policy will pay its per-person limit of $25,000. The remaining damages are $40,000 - $25,000 = $15,000. Since $15,000 is less than the client's UIM per-person limit of $100,000, the UIM coverage will pay $15,000.
Why the other options are wrong
- A. This is the full amount of the client's injuries, but UIM is excess over the at-fault driver's policy.
- B. This is what the at-fault driver's policy pays, not the UIM policy.
- D. Incorrect; UIM coverage is specifically designed for this scenario.
Underinsured Motorist (UIM) Payout
Underinsured Motorist (UIM) coverage pays for the insured's bodily injuries when the at-fault driver has some liability insurance, but not enough to cover the full extent of the damages, up to the insured's UIM limit.
- Applies when at-fault driver has insufficient insurance.
- Typically pays damages minus the at-fault driver's payout.
- Subject to the insured's UIM policy limits.
- Does not pay if the at-fault driver's limits exceed the UIM limits.
Memory trick: My damages minus their payout, then check my UIM limit.