Reduced By (sometimes referred to as “Standard”) indicates that the applicable coverage’s limit is reduced by all sums paid through the legally responsible party’s Bodily Injury and Property Damage coverages. For example in a scenario where the insured has applicable Reduced By coverage of Underinsured Motorists Coverage with a $100,000 limit and there is an accident causing $150,000 in damage to the insured with which the other party is legally responsible then, assuming the other party had a Bodily Injury limit of $20,000, the insured would receive $100,000 (i.e. $20,000 in Bodily Injury payments from the other party and $80,000 ($100,000 Underinsured limit minus the other party’s BI and PD payments) in Underinsured Motorists coverage).
Added On To (sometimes referred to as “Conversion”) indicates that the applicable coverage’s limit is added onto all sums paid through the legally responsible party’s coverages. For example in a scenario where the insured has applicable Added On coverage of Underinsured Motorists Coverage with a $100,000 limit and there is an accident causing $150,000 in damage to the insured with which the other party is legally responsible then, assuming the other party had a Bodily Injury limit of $20,000, the insured would receive $120,000 (i.e. $20,000 in Bodily Injury payments from the other party and $100,000 ($100,000 Underinsured limit plus the other party’s payments) in Underinsured Motorists coverage).
See policy forms for full details.