What characteristic distinguishes uninsured motorists coverage from underinsured motorists coverage?

Uninsured motorists coverage and underinsured motorists coverage both provide financial protection in the event of an accident involving another driver. However, they serve distinct purposes based on the insurance statuses of the involved parties.

The characteristic that distinguishes underinsured motorists coverage is that it applies specifically when the at-fault driver has insurance, but their liability limits are insufficient to cover the damages incurred. In this case, underinsured coverage comes into play when the costs of the accident exceed the at-fault driver's liability coverage limits.

In contrast, uninsured motorists coverage is designed for scenarios where the other driver lacks any insurance coverage entirely. It protects the insured driver from losses when involved in an accident with an uninsured driver, including hit-and-run situations.

This distinction is important for drivers to understand as it determines what kind of coverage they may need to protect themselves against potential financial losses due to accidents caused by other drivers. The correct answer accurately reflects the specific scenario where underinsured coverage is applicable, highlighting its role in situations of inadequate insurance rather than a total lack of it.