What is "underinsured motorist coverage" designed to protect against?

Underinsured motorist coverage is specifically designed to protect policyholders when they are involved in an accident with a driver who has insurance, but the limits of that insurance are insufficient to cover the damages incurred by the victim. This type of coverage provides additional financial protection to the insured, allowing them to recover costs beyond what the at-fault driver's policy can pay.

In scenarios where the at-fault party has minimal coverage that does not adequately compensate for medical expenses, vehicle damage, or other costs resulting from the accident, underinsured motorist coverage steps in to cover the difference. This ensures that the insured is not left financially vulnerable due to another driver's inadequate insurance limits.

The other choices address different scenarios that do not align with the specific purpose of underinsured motorist coverage. For instance, coverage is not focused on uninsured drivers or minor accidents with little financial impact, but rather it exists to fill the gaps created by those who are technically insured yet lack adequate limits to fully address the consequences of a substantial accident.