What type of coverage compensates for damages when a driver is involved with an underinsured motorist?

Underinsured motorist coverage is designed specifically to protect drivers when they are in an accident with a driver whose insurance is insufficient to cover the damages. This type of coverage ensures that if the other party does not have enough liability insurance to pay for the medical bills, property damage, or any additional costs resulting from the accident, the insured can still receive compensation up to the limits of their own underinsured motorist policy.

This protection is particularly valuable because it addresses the gap that can occur when another driver is at fault but does not have adequate insurance. Such situations can leave an accident victim facing significant costs with limited options for recovery, making underinsured motorist coverage a critical element of a comprehensive personal auto insurance plan.

In contrast, collision coverage would only address damages to the insured's own vehicle regardless of who caused the accident, liability coverage protects against claims made by others for damages caused by the insured, and medical payments coverage specifically deals with medical expenses for the insured and passengers, but not the situation of insufficient insurance from the other driver. Thus, underinsured motorist coverage is the correct answer as it directly relates to compensating for damages resulting from accidents with underinsured motorists.