Texas Property and Casualty License Practice Exam

Which situation does Underinsured Motorist Coverage address?

1. Accidents involving hit-and-run drivers

2. Accidents caused by uninsured drivers

3. Accidents where the at-fault driver has insufficient liability insurance

4. Accidents involving insured drivers only

The correct answer is: Accidents where the at-fault driver has insufficient liability insurance

Underinsured Motorist Coverage is specifically designed to protect insured individuals when they are involved in accidents where the at-fault driver does not have sufficient liability insurance to cover the damages incurred. In practical terms, this means that if you are injured or suffer property damage in an accident caused by another driver, and that driver’s insurance coverage is lower than the costs of your injury or damage, Underinsured Motorist Coverage steps in to fill that gap. This ensures that the insured party can recover their full damages, rather than being left with unmet medical expenses or asset damages due to the inadequate coverage of the at-fault driver. All other options represent different types of situations not covered by Underinsured Motorist Coverage. For instance, accidents involving hit-and-run drivers would generally be addressed by Uninsured Motorist Coverage instead, as the identity of the at-fault driver is unknown. Accidents caused by uninsured drivers also fall under Uninsured Motorist Coverage, which protects against drivers without any insurance at all. Lastly, while insured drivers are involved in Underinsured Motorist Coverage, the critical distinction is that this coverage specifically addresses the lack of adequate insurance from the at-fault party.