Auto Insurance Liability Limits Explained

Automobile insurers hardly ever offer infinite coverage. Usually, policy schedule specifies the maximum amount they are prepared to pay for each insured peril. You need to be aware of the limitations of your policy and consider if it is acceptable to you or you want to do something about it. You can increase your car insurance liability limits to a more comfortable level but this will raise your premium too.

An insurer agrees to indemnify anyone who may have a legitimate auto liability claim against insured drivers. However, these policies specify the maximum amount payable. Each state determines the lowest coverage limits that must be purchased. But motorists are advised to choose more comfortable amounts to reduce the chance of having insufficient insurance when it is needed.

Ceilings of a third party cover are explained below.

Bodily Injury Liability Limit Per Person: This is the maximum amount your carrier is prepared to pay per injured person in each accident that was your fault.

Bodily Injury Limit Per Accident: This is the ceiling of compensation for the medical expenses of everyone injured in each accident you caused.

Property Damage Liability Limit: This is the maximum amount your policy will pay for property damages of third parties per incident.

Usually, you see these figures expressed as 25/50/25. This means that the maximum amount for single injured person is $25,000, total payout for all the injuries is $50,000 and total property damage cover is $25,000.

What Are the Recommended Liability Vehicle Insurance Limits?

Usually, state required basic policy isn’t enough to meet today’s expensive medical costs and pay for damages to decent cars. It keeps you legal and nobody can argue with you if you don’t have enough money to pay for a better cover. However, if you have a home and other assets to protect from lawsuits you should make sure that you buy sufficient protection. Let’s have a look at an example below.

If several people suffered and first one claims $20,000, the second one $15,000 and the third one $10,000 you will have enough coverage since nobody claimed more than single limit and the total ($45,000) is still less than the maximum of $50,000. If one person claimed more than the $25,000 or the final figure is higher than $50,000 you would have problem since you are expected to make up the difference out of your pocket.

That is why it is important to buy sufficient cover and most experts advise at least a 100/300/100 coverage. The higher the better and you may be able to get the extra cover at a minimal additional premium if you shop around.

You should be comfortable with the provisions of your auto insurance liability coverage and it shouldn’t stretch your budget beyond your means. Generally, carriers are happy to increase the level of protection up to a point. Once that point passed it becomes really expensive and it may only be worth if you are a rich person with an expensive house and other assets.

Furthermore, even a full coverage policy would have ceilings to be aware of. For example, your insurer would only pay current market value of your automobile if it were totaled. This could be problematic, especially if you have a large outstanding auto loan to pay off. In such cases, you may need to consider buying GAP Insurance.

That is why it is important to have a good look at your policy in the light of your circumstances. Otherwise, you may be too late when you realize after a claim that your policy isn’t up to the task of covering all your losses or all of the claims against you.

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