If an insurance company acts in bad faith, it can be subject to significant punitive damages. Punitive damages are damages that serve only to punish and deter bad behavior, not compensate you for a particular loss. Examples of bad faith are wrongful denial of claims, refusing to make a settlement offer, delaying payment of claims and making unreasonable policy interpretations.
An insurance contract is an agreement in which the insured pays an insurance premium and the insurer promises to pay covered losses if experienced.
Underinsured insurance is important insurance coverage that pays you if you suffer loss (i.e. injury or property damage) at the hands of another individual who does not have adequate auto insurance coverage to pay part or all of your claim. This type of insurance can be in addition to other insurance that you have and therefore have its own separate premium. Your own auto insurance company reimburses you for any losses above and beyond the limits of the negligent individual’s insurance coverage.