What does "underinsured motorist coverage" cover?

Underinsured motorist coverage is designed to protect insured individuals when they are involved in an accident with a driver who has insurance, but the liability limits of that driver's policy are not sufficient to cover the full extent of the damages incurred. This coverage comes into play when the at-fault party has some level of insurance, but it is inadequate compared to the costs of medical expenses, vehicle repairs, lost wages, or other damages the insured may have.

This coverage is particularly important because it helps ensure that if the insured is injured or their vehicle is damaged due to another driver’s negligence, they can still receive adequate compensation for their losses, even if the at-fault driver's policy limits fall short. It helps fill the gap between what the at-fault driver’s insurance can cover and the actual costs incurred by the insured.

The other options do not accurately describe underinsured motorist coverage: it does not pertain to damage caused by uninsured drivers, handle theft situations, or focus solely on personal injury claims.