Question 96

Underinsured motorist coverage applies when the driver of the vehicle that caused the accident has insufficient liability limits.

Underinsured motorist coverage is designed to protect individuals when the at-fault driver's insurance coverage is inadequate to cover the damages incurred. This specifically occurs when the at-fault driver has liability limits that fall below the coverage limits of the non-negligent driver's underinsured motorist policy.

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

This option is incorrect because underinsured motorist coverage specifically applies when the at-fault driver has insurance but their coverage limits are insufficient. If the driver has no coverage at all, then uninsured motorist coverage would be applicable, not underinsured.

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 is the correct option, as underinsured motorist coverage is intended for situations where the at-fault driver carries insurance, but their liability limits are inadequate to fully compensate the injured party. It specifically addresses the gap between the at-fault driver's coverage and the injured party's own higher limits.

C) accident is caused by a hit and run driver

This option is incorrect because hit and run accidents typically fall under uninsured motorist coverage, not underinsured motorist coverage. Underinsured motorist coverage applies when the at-fault driver has insurance but insufficient limits.

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

This option is incorrect, as the minimum statutory limits may not provide enough coverage to fully compensate for damages. Underinsured motorist coverage is activated when the at-fault driver has liability limits that are lower than the injured party's underinsured motorist limits, which is not necessarily the case with minimum limits.

Conclusion

In summary, option B is definitively correct as it captures the essence of underinsured motorist coverage, which is triggered when the at-fault driver's insurance limits are inadequate. The other options fail to address the specific conditions under which underinsured motorist coverage is applicable, focusing instead on scenarios that do not align with its intended purpose.