25 Jan What Is an Auto Insurance Limit?
An auto insurance policy protects you from financial loss in the event of a car accident or theft under a contract between you and the insurance company. The insurance company pays your losses based on the terms of your policy in exchange for you paying the premium.
It is almost universal that personal auto insurance is mandatory in the United States, although the method of enforcing that requirement differs from state to state. The type of coverage you choose for auto insurance will depend on your budget and needs.
The policies are generally valid for six months or one year, with the option to renew them. If you need to renew the policy and pay the premiums, you’ll receive a notice from your auto insurance company. It’s also important to understand what a limit is. The insurance coverage limit is a set of guidelines given by the insurance company detailing the maximum payout for a covered claim.
Here’s everything about auto insurance coverage limits explained.
Auto Insurance Coverage Limits Explained
The coverage limits of an automobile insurance policy refer to the maximum amount the policy will pay in case of an insured accident. After this limit has been reached, you must take responsibility for the cost of the remaining portion.
In a significant accident, where the medical bills rack up quickly, this can be a hard pill to swallow. To ensure that you’re comfortable with the limits in your auto insurance policy, it’s crucial to understand how the limits work and to review them from time to time. You can avoid headaches and uncertainty after an accident if you do some preparation beforehand. This article will describe the different coverage limits at work in most auto insurance policies.
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What Do the Three Numbers in Car Insurance Mean?
There are three numbers on auto insurance policies, and they represent the limits for the three categories of coverage – bodily Injury per person, bodily injury per occurrence, and property damage. These coverages are always based on what type of policy coverage was purchased.
Automobile insurance policies will include these three numbers only if certain types of coverage are included. Here are the coverages in which these three numbers will appear:
- Motorists without insurance
- Underinsured Motorist
What Is Bodily Injury Liability?
Those who cause a car accident are covered under bodily injury liability coverage. This coverage pays for any injuries someone else sustains along with their medical bills resulting from the car accident. If you were involved in an accident and were being sued for your actions, you may also be able to claim legal fees under this coverage. A bodily injury liability policy is a coverage that is mandatory in most states when you purchase a car insurance plan.
This insurance coverage also includes passengers or drivers in another vehicle, pedestrians, as well as unrelated passengers in your car. However, this coverage does not cover the medical expenses or wages that you or your family might lose if you are at fault. Although, it may be able to assist you in your legal costs if a lawsuit is filed against you for an accident you caused.
What Is the Difference Between Per Person and Accident?
The insurance policy you carry for your car usually includes a bodily injury liability limit that indicates how much will be paid toward a covered claim. There are two coverage limits for bodily injury liability coverage: a per-person and an accident limit.
Each person injured in an accident is subject to the per-person limit. For example, suppose you have a $50,000 limit. Therefore, bodily injury liability would only pay a maximum of $50,000 for all of the person’s medical expenses in a car accident.
In cases where multiple people are injured in one accident, the total limit applies to each accident. Let’s say you have a $100,000 limit per accident. So, for instance, if three people are injured in a car accident, the maximum your bodily injury liability could reimburse is $100,000 (and only up to the amount that can be paid per injured person).
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What Is Property Damage Liability?
An auto insurance policy includes property damage liability coverage as part of the policy terms and conditions. So if you damage another person’s property or vehicle, it will help you pay for the repairs when you are at fault.
Generally, property damage liability insurance is mandatory in most states in the USA. A collision insurance policy usually covers repairs if you cause damage to another vehicle or property, such as a fence or building front.
Usually, the liability coverage for property damage does not cover damage to your vehicle in the event of an accident. Therefore, to help cover the cost of repairing your car, you might want to consider other coverage options, such as collision coverage.
How Much Does Liability Insurance Cost?
The average cost of state-minimum liability car insurance is $644 annually.
A liability insurance agent will factor in a long list of items to determine your monthly premiums. The following factors are taken into account when figuring your liability insurance premium:
- The type of vehicle
- Your location
- Credit score
- Driving record
- Net worth
- Your age
- How you structure your policy
The purpose of liability insurance is to protect you against bodily injury and property damage costs incurred by the other party if you are at fault for an accident. It is essential to recognize that there are multiple ways to structure your liability insurance policy due to the two-pronged nature of the coverage. You can choose a split limit policy covering those elements or opt for a single limit policy.
Suppose you decide to set individual limits for bodily injury per person, bodily injury for the entire accident, and property damage. In that case, you will have to select each limit separately. However, it is worth noting that a single limit is one total sum spread across all the costs of an accident, irrespective of their classification.
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What Liability Limits Should I Carry?
When purchasing liability insurance, make sure you are buying enough coverage to cover your potential losses in the event of a lawsuit against you. For example, the California state minimum policy has 250/500/100 coverage, so a policy with 250/500/100 is a much better option.
A liability umbrella insurance policy will provide additional liability coverage beyond your standard auto and home policies. An umbrella policy can provide extra liability coverage of $1 million or more for a relatively small cost.
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What Isn’t Covered by Liability Insurance?
Several provisions are not covered with liability insurance, including intentional damage, contract liabilities, and criminal prosecutions.
Thus, although the insured party may be legally responsible for the incident, liability insurance will not cover intentional or criminal acts.