How does stacking of coverage work in auto insurance?

Stacking of coverage in auto insurance refers to the practice of combining liability limits from multiple insurance policies or multiple vehicles under a single policy to increase the amount of coverage available in the event of a claim. This is particularly relevant for uninsured or underinsured motorist coverage, where policyholders with multiple vehicles can "stack" their limits, allowing them to access higher coverage amounts in case of an accident involving another party that has inadequate coverage.

By allowing this combination of coverage limits, stacking provides better financial protection for policyholders, as they can benefit from the accumulated coverage across their vehicles. This can be especially useful in situations where damages exceed the single vehicle's policy limits, ensuring that policyholders have sufficient insurance to cover their losses.

The other options listed do not accurately capture the essence of stacking coverage. For instance, transferring coverage to another policy does not reflect the nature of stacking; similarly, while premiums may vary based on the number of vehicles insured, they do not inherently increase solely due to stacking. Lastly, stacking does not involve eliminating exclusions in the policies, as it focuses more on the limits and available coverage.