Automobile Insurance Liability Limits
Regardless of what type of risk you are or which insurance company you choose to buy from, you will have to select the limits of insurance you desire.
Simply put, these are the dollar amount limits your insurer will pay another party for a claim you are found liable for. There are two main categories of liability insurance. First is the bodily injury to others as a result of an accident you caused. The second type of liability coverage built into your personal auto policy is the property damage coverage for an accident you caused, such as damaging someone’s vehicle or personal belongings.
The cost your insurer pays to defend you in any court case is in addition to any resulting liability damages awarded to the other party. For example, if you have $100,000 each occurrence liability limits, and the limit is exhausted, meaning your insurer had to pay all $100,000 to a person you injured, your insurer will pay the court costs on top of the $100,000, regardless of how much it costs.
There are many aspects to consider in evaluating what you need and more importantly, what you can afford. These range from the mandatory state minimum liability limits to full coverage maximum limits, including physical damage coverage.
For a brief overview, take a look at where you fit in the marketplace. Generally, it is advisable to work directly with the insurance carrier of your choice or to select an independent insurance agent to determine your needs. Either will be qualified to ask the right questions to get you on track.
Automobile insurance liability limits are typically expressed in the following three-bracket format:
per person/per occurrence/property damage
These limits are also expressed on your personal auto policy numerically as shown below:
100/300/50
100 – The first number listed is the limit of insurance you have for injury to EACH person in the event of one accident you are found liable for. Up to $100,000 will be paid to each individual, but not to exceed the total of $300,000 for each occurrence, or accident.
300 – The second number listed is the dollar limit of bodily injury liability you have for each occurrence, or accident. Regardless of how many people you injure in one accident, the most money your insurer will pay is $300,000.
50 – The third number listed is the limit of liability insurance you have for damage to someone’s property in the event of one accident you cause. It does not matter how many vehicles, or any other property (a mailbox for example) you damage. Your insurer will pay a maximum $50,000 per occurrence for others’ property.
Let’s look at an example: You have limits of 100/300/50. You are found liable (at fault) for an accident in which you injure three people and damage their vehicle. The following is a list of the damages awarded by the courts:
Person #1 – $50,000 in injuries
Person #2 – $125,000 in injuries
Person #3 – $15,000 in injuries
Other driver’s vehicle – $35,000 damage
Your insurer would pay the following amounts:
Person #1 – $50,000 (per person limit of $100,000 is not exceeded)
Person #2 – $100,000 (even though the court awarded $125,000, your per person limit is $100,000. You would be personally responsible for the additional $25,000. This example illustrates why you should choose the highest limits you can afford)
Person #3 – $15,000 (per person limit of $100,000 is not exceeded)
Other person’s vehicle – $35,000 (the property damage limit of $50,000 per occurrence is not exceeded)
It is important to understand what these numbers mean when you purchase an auto insurance policy. It is recommended you purchase as much insurance as you can afford. The more assets you own, the higher the limits you will want to purchase.
For example, if you own a home, you will want the highest possible. If you are found liable (at fault) for an accident and the person you injured is awarded damages (money) higher than your limits, you are responsible for paying the additional amount awarded above your limits.
Each state determines their own minimum insurance limits. In addition to this basic liability coverage and physical damage coverage, there is also Personal Injury Protection (PIP), Medical Payments (Med Pay), Uninsured Motorist (UM), Underinsured Motorist (UIM), and No Fault insurance.
