How does Uninsured Motorist Coverage (UM) differ from Underinsured Motorist Coverage (UIM)?

Uninsured Motorist Coverage (UM) and Underinsured Motorist Coverage (UIM) serve different purposes in protecting motorists involved in accidents. UM is designed to provide coverage when the other party involved in an accident does not have any insurance at all, meaning they are completely uninsured. In contrast, UIM comes into play when the responsible party does have some insurance, but their coverage limits are insufficient to cover the total damages incurred by the injured party.

The distinction lies primarily in the scenario each type of coverage addresses: UM steps in when there is a total lack of insurance, while UIM addresses situations where there's inadequate insurance. Understanding this difference is crucial for drivers to ensure they have the appropriate coverage to protect themselves in the event of an accident with another driver who lacks proper insurance or whose insurance is inadequate for the damages caused.

Regarding the other choices, they do not accurately reflect the key differences between UM and UIM. Therefore, this clear delineation makes the first option the correct understanding of how these two types of coverage differ.