What is the primary condition under which Underinsured Motorist (UIM) coverage applies?

Underinsured Motorist (UIM) coverage is designed to protect an insured driver when they are involved in an accident with a motorist who does not have sufficient insurance to cover the damages resulting from the incident. The primary condition under which UIM coverage applies occurs when the at-fault driver's liability limits for bodily injury are lower than the actual damages incurred by the insured.

This situation addresses the gap that exists when the at-fault driver holds a liability insurance policy that is inadequate to cover the costs of the injuries sustained. Without UIM coverage, the affected driver would be left with the burden of covering their own expenses out-of-pocket, which can be significant depending on the circumstances of the accident. UIM ensures that the insured can recover the compensation owed when the at-fault party's insurance falls short, providing a necessary safety net for drivers.

The other options do not accurately define the conditions under which UIM coverage is activated. For instance, if the at-fault driver has a liability limit greater than the damages, UIM coverage would not apply, as adequate compensation would already be available through the other party's insurance. Additionally, the presence or absence of other coverage, or the status of the vehicle (whether commercial or personal), does not define