Question 96

Underinsured motorist coverage ONLY applies when the driver of the vehicle that caused the accident has insufficient liability limits that are lower than the underinsured motorist coverage on the non-negligent driver's policy.

Underinsured motorist coverage is applicable when the at-fault driver's liability insurance coverage is insufficient to cover the damages incurred by the non-negligent driver. This ensures that the non-negligent driver can recover costs that exceed the at-fault party's coverage limits.

A) driver of the vehicle that caused the accident has no coverage

This option is incorrect because underinsured motorist coverage specifically addresses situations where the at-fault driver has some insurance coverage, but it is inadequate to cover the damages. If the at-fault driver has no coverage, then uninsured motorist coverage, not underinsured motorist coverage, would apply.

B) driver of the vehicle that caused the accident has insufficient liability limits that are lower than the underinsured motorist coverage on the non-negligent driver's policy

This option is correct because underinsured motorist coverage is designed to protect the non-negligent driver when the at-fault driver's insurance limits are lower than the amount needed to cover the damages. This allows the non-negligent driver to claim the difference from their own underinsured motorist policy.

C) accident is caused by a hit and run driver

This choice is incorrect as underinsured motorist coverage does not apply in hit-and-run scenarios. Instead, these incidents generally fall under uninsured motorist coverage, which is specifically for accidents involving drivers who cannot be identified or located.

D) driver of the vehicle that caused the accident has the minimum statutory limits of liability required by the state

This option is incorrect because merely having minimum statutory limits does not automatically qualify as underinsured. If the non-negligent driver's damages exceed those minimum limits, they may still need to rely on their underinsured motorist coverage to recover the full amount.

Conclusion

The correct answer is B because it accurately defines the conditions under which underinsured motorist coverage becomes applicable, specifically focusing on the inadequacy of the at-fault driver's insurance limits. All other options misinterpret the conditions related to underinsured or uninsured motorist coverage, making them incorrect in the context of this question.