DEFINITION of 'Underinsured Motorist Coverage'

An auto insurance policy provision that extends coverage to include property and bodily damage caused by a motorist with insufficient insurance. Underinsured motorist coverage is designed to provide the injured party with compensation above what is alloted by the at-fault party's policy.

BREAKING DOWN 'Underinsured Motorist Coverage'

State laws typically require all motorists to have some form of auto insurance, although it is difficult for those states to maintain 100% compliance. Some drivers will purchase only the minimum amount of coverage required by law. The addition of underinsured motorist coverage usually adds only a nominal expense to the general insurance coverage.

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