What is the purpose of "underinsured motorist" coverage?

Underinsured motorist coverage is specifically designed to offer financial protection to policyholders when they are involved in accidents with drivers who have insurance but whose coverage limits are too low to fully compensate for the damages incurred. In other words, if another driver causes an accident and their liability insurance does not cover all of your expenses—such as medical bills, lost wages, and property damage—underinsured motorist coverage will help cover the gap between what their insurance pays and what you need, ensuring that you are not left with significant out-of-pocket expenses due to someone else's inadequate insurance.

This type of coverage is crucial because it addresses a common scenario where even insured drivers may not have enough coverage to adequately compensate victims of accidents they cause, helping to protect you financially in those situations. Other options presented—such as protecting against uninsured drivers or covering theft—do not accurately define the scope of underinsured motorist coverage, which is focused solely on underinsured situations.