Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client is involved in an accident with a driver who has insufficient liability insurance to cover the client's bodily injuries. The client's own policy has Underinsured Motorist (UIM) Bodily Injury coverage. Which of the following best describes how UIM coverage would respond?
- AUIM would pay the full amount of the client's damages, regardless of the at-fault driver's policy.
- BUIM would cover the client's property damage, but not bodily injury.
- CUIM would pay the difference between the client's damages and the at-fault driver's liability limits, up to the UIM limit.
- DUIM would only apply if the at-fault driver had no insurance at all.
Show answer & explanationAnswer & explanation
Correct answer: C. UIM would pay the difference between the client's damages and the at-fault driver's liability limits, up to the UIM limit.
Underinsured Motorist (UIM) coverage is designed to bridge the gap when an at-fault driver has some liability insurance, but not enough to fully cover the injured party's damages. It pays the difference up to the UIM limit.
Why the other options are wrong
- A. UIM is not primary coverage; it's designed to supplement, not replace, the at-fault driver's insurance.
- B. UIM Bodily Injury covers bodily injury; UIM Property Damage is a separate, optional coverage.
- D. This describes Uninsured Motorist (UM) coverage, not Underinsured Motorist (UIM).
Underinsured Motorist (UIM) Bodily Injury
Coverage that protects an insured when an at-fault driver has liability insurance, but their limits are insufficient to cover the full amount of the insured's bodily injury damages.
- Pays the difference between the at-fault driver's liability payout and the insured's damages.
- Subject to the insured's UIM policy limits.
- Designed to supplement, not replace, the at-fault driver's insurance.
- Different from Uninsured Motorist (UM) coverage.
Memory trick: UIM: Underfunded Injuries, Insured Makes up the Missing.