So you have car insurance – take a minute to look at your policy.
Do you see numbers that look like this: $50k/$100k/$50k? What do those numbers mean to you? It is important that you understand these numbers, what they mean, and if you have the insurance you think you have!
Liability Limits – WHY YOU SHOULD CARE
Your Auto Liability pays for damages to Other People’s bodily injury and/or property damage if it is determined that you were at fault in an auto accident. It is important to carry high enough limits to protect yourself, your family, and your assets.
From a 30,000 foot view – there are two types of Auto Liability coverages; Split Limits and Combined Single Limit. There are advantages and disadvantages to both, and depending on which State you are in there can be some unique circumstances that affect your policy. This is simply an attempt to help you think about what it all means.
Split Limits: Per Person / Per Accident / Property Damage.
Per Person – this is the maximum amount your policy will pay in Bodily Injury damages for any one person you injure in an at fault accident.
Per Accident – this is the maximum amount your policy will pay Total in Bodily Injury damages for any one accident you are responsible for.
Property Damage – this is the maximum amount your policy will pay in Total Property Damage for any one accident you are responsible for.
For example; your policy might show numbers like this: $50k/$100k/$50k.
Let’s say you rear end a vehicle, and it is your fault, and you injure three of the other car’s passengers, and total their vehicle.
Let’s say Passenger 1 has $30k in medical bills resulting from the accident. Your policy would cover that amount. Let’s say Passenger 2 has $50k in medical bills resulting from the accident. Your policy would cover that amount. Now let’s say that Passenger 3 also has $50k in medical bills resulting from the accident.
The max per person is $50k BUT the max per accident is only $100k. Passenger 1 = $30k + Passenger 2 = $50k + Passenger 3 = $50k == $130k. You would be responsible for the remaining $30k out of pocket.
Now let’s also assume the person was driving a Tesla Model X (you see those everywhere now). The damage to the vehicle has totalled it, and you need to purchase them a similar car at the price tag of $100k. Your policy, in this example, only has $50k available. You would be on the hook for the remaining $50k!
That’s $80k out of pocket on this claim!
Combined Single Limit –
This is the total amount your policy has for any one at fault accident. Does not matter where the money goes, necessarily, just that you have one “bucket’ to pull money from.
In the above example if you were carrying $300k CSL (Combined Single Limit) your policy would have paid the entire claim with no money out of your pocket.
One would assume this costs a TON more to have a CSL vs/ Split Limits, or even to increase your Split Limits. Well, not necessarily. A vast majority of the time we find that the increased limits do not cost very much at all.
It is very important for you to understand that the above scenarios were just examples, and your policy may or may not have limitations, exclusions, etc. Unfortunately not all Auto Insurance policies are created equal. Sometimes there are some nasty surprises that can arise at claim time.
We HIGHLY recommend that you have us review your auto policy with you, and that you increase your Liability Limits to the maximum you can. Skimping on Liability limits is setting yourself up for disaster should something drastic occur.