In what situation would a policyholder benefit from 'underinsured motorist coverage'?

Underinsured motorist coverage is designed to protect policyholders when they are involved in an accident where the at-fault driver does not have enough insurance to cover the damages. This type of coverage kicks in when the other party's insurance policy limits are insufficient to pay for the costs associated with the injury or damage incurred.

For example, if a policyholder is injured in an accident and the liable party's coverage only pays a portion of the medical bills or vehicle repairs, underinsured motorist coverage allows the policyholder to claim additional funds up to their own insurance policy limits. This extra layer of protection is crucial as it ensures that the policyholder is not left paying out of pocket for expenses that they are not financially responsible for due to another party's inadequate coverage.

Other options, such as having low personal insurance limits or being responsible for the accident, do not align with the purpose of underinsured motorist coverage. Additionally, this coverage does not apply in cases of vehicle theft, as it primarily pertains to accidents involving other drivers.