A client's Personal Auto Policy (PAP) has Underinsured Motorist (UIM) Bodily Injury limits of $100,000 per person. The client is hit by another driver who is at fault and has liability limits of $50,000 per person. The client's bodily injuries are determined to be $80,000. How much will the client's UIM coverage pay?
- A$80,000
- B$30,000
- C$50,000
- D$0
Show answer & explanationAnswer & explanation
Correct answer: B. $30,000
Underinsured Motorist (UIM) coverage pays the difference between the insured's UIM limits and the at-fault driver's liability limits, up to the insured's damages. The at-fault driver's policy pays $50,000. The UIM coverage will pay the remaining damages up to the UIM limit, which is $80,000 (total damages) - $50,000 (at-fault driver's payout) = $30,000. This is within the client's UIM limit of $100,000.
Why the other options are wrong
- A. This would be the total damages, but UIM only pays the amount beyond what the at-fault driver's policy pays, up to its own limit.
- C. This is the amount paid by the at-fault driver, not the UIM coverage.
- D. UIM coverage is designed to pay in such situations.
Underinsured Motorist (UIM) Payout
Underinsured Motorist (UIM) coverage pays for bodily injury (and sometimes property damage) when the at-fault driver's liability insurance is insufficient to cover the damages sustained by the insured, up to the insured's UIM policy limit.
- Supplements the at-fault driver's insufficient liability coverage.
- Pays the difference between damages and the at-fault driver's payout, up to UIM limits.
- Protects the insured from drivers with low liability limits.
Memory trick: UIM fills the 'gap' between the limited other driver's payout and your full damages, up to your UIM limit.