Property and Casualty Insurance Practice Exam

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What type of driver does Underinsured Motorist Coverage (UIM) protect against?

  1. A driver with no insurance

  2. A driver whose liability limits are insufficient

  3. A driver who is underage

  4. Any out-of-state driver

The correct answer is: A driver whose liability limits are insufficient

Underinsured Motorist Coverage (UIM) is specifically designed to protect insured individuals against drivers whose liability insurance limits are insufficient to cover the damages resulting from an accident. This type of coverage comes into play when the at-fault driver has insurance, but their coverage amount is lower than what is required to fully compensate the injured party for damages, such as medical bills or property damage. UIM fills the gap by providing additional coverage up to the insured's policy limits, ensuring they have adequate financial protection after an accident. In contrast, a driver with no insurance would be protected by Uninsured Motorist Coverage (UM), which is different from UIM. Drivers who are underage or any out-of-state drivers do not specifically fall under the UIM definition and are not relevant to the specific protections offered by Underinsured Motorist Coverage.

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