Underinsured Motorist Coverage Limits Trigger: Definition, How It Works, and Examples

In the realm of auto insurance, underinsured motorist coverage serves as a safeguard against the financial repercussions of accidents involving drivers with insufficient insurance. When the liability coverage of an at-fault driver falls short of the damages incurred by the insured party, the underinsured motorist coverage limits trigger comes into play, bridging the gap to ensure adequate compensation.

It’s essential to differentiate underinsured motorist coverage from uninsured motorist (UM) coverage. While underinsured coverage applies when the at-fault driver’s insurance is insufficient, UM coverage comes into effect when the at-fault driver lacks any insurance at all. Despite their differences, both coverages offer invaluable protection against uninsured or underinsured drivers and are typically bundled together as a prudent addition to an auto insurance policy.

To illustrate the workings of underinsured motorist coverage, consider a scenario where an insured individual holds coverage up to $500,000 with a limits trigger. In the event of an accident with an at-fault driver carrying only $100,000 in insurance coverage, and damages amounting to $150,000, the insured person’s underinsured motorist coverage would kick in due to the limits trigger, ensuring adequate compensation.

Underinsured motorist coverage requirements vary by state. While some states mandate this coverage, others do not. However, it’s generally recommended to carry this coverage for added protection.

Determining suitable coverage limits for underinsured motorist coverage hinges on factors such as the insured individual’s assets, potential medical expenses, and the likelihood of accidents involving underinsured drivers. Consulting with an insurance agent can help assess and determine appropriate coverage limits tailored to specific needs.