How I understand it...assuming they are the 'at fault' party: Their max might not be enough to cover ALL your damages, so if the accident cost $100k total between damage, medical, etc, and their 12.5k/25k policy comes up short, then the difference has to be made up out of your insurance policy. Your insurance forks over cash up to YOUR limits, and then they sue the other party for the difference. The whole reason why some people get expensive coverages is because they have more to lose. Ie. if you have a nice $450k home, some cars, some bikes, $1M net worth and you roll around with minimum coverage and royally injure someone (like a motorcyclist), then that max. liability will run out REAL quick and then you're in civil court getting sued by the guy you hit AND his insurance company to recoup their costs -- they'll go for your home, cars, bikes, etc. Now in the real world, people that have min. coverage often don't have a lot to lose... and since "you can't squeeze blood from a turnip"... . That's what he means when he says "you're not covered" because the schmuck that hit you is a low net worth individual who's insurance and assets combined won't pay for your losses. Additional insurance on YOUR end will protect yourself.