insurance policy limits

How To Read Your Insurance Limits

There are 4.4 million people who suffer injuries every year as a result of automobile accidents. If you are found at fault in the accident your insurance company will be paying for the other driver’s expenses. That is why insurance policy limits are an important consideration when purchasing insurance.

After purchasing or making a change to your insurance, you will receive a copy of the policy. Reading through that stack of paperwork that looks like a jumble of legal jargon may seem overwhelming. It is important you understand what coverage you have and what your insurance limits are.

What are Insurance Limits?

Insurance limits are the maximum amount of money your insurance will pay for a specific loss. You will often see them on your policy as a series of numbers, such as 30/60/25. What that means is that in the event of a claim, your insurance company will pay:

  • Up to $30,000 in bodily injury coverage per person
  • Up to $60,000 in bodily injury coverage per accident
  • Up to $25,000 in property damage per accident

When considering limit amounts for your insurance, you need to remember that if you do not have sufficient insurance, you may be sued. A court may order you to pay the difference between the insurance coverage and the actual cost of damages.

While the amounts listed above appear to be sufficient, keep in mind that costs from automotive accidents encompass several factors. A person suffering injuries is entitled to wage compensation, medical expenses, motor vehicle damage repair or replacement, and more.

If you are in an automobile accident and a person suffers a disabling injury the average economic impact is $98,400. If a person dies from the accident the cost averages $1,704,000.  Even in an accident in which there is no personal injury the average financial impact is $12,500.

Minimum State Requirements

Each state establishes a minimum amount of coverage you must carry for bodily injury, property damage, personal injury protection, and uninsured or underinsured motorist coverage. This can vary drastically depending on where you live, for example:

  • Arizona—$25,000 bodily injury per person; $50,000 bodily injury per accident; $15,000 property damage per accident
  • California—$15,000 bodily injury or death per person; $30,000 bodily injury or death to more than one person; $5,000 property damage per accident
  • Colorado—$25,000 bodily injury per person; $50,000 bodily injury per accident; $15,000 property damage per accident
  • Michigan—$50,000 bodily injury per person; $100,000 bodily injury per accident; $10,000 property damage in another state; $250,000 personal injury protection
  • North Dakota—$25,000 bodily injury per person; $50,000 bodily injury per accident; $25,000 property damage per accident; $25,000 uninsured/underinsured coverage per person; $50,000 uninsured/underinsured motorist per accident; $30,000 personal injury protection
  • Pennsylvania—$15,000 bodily injury per person; $30,000 bodily injury per accident; $5,000 property damage per accident; $5,000 medical benefit
  • Washington—$25,000 bodily injury per person; $50,000 bodily injury per accident; $10,000 property damage per accident
  • Wisconsin—$25,000 bodily injury per person; $50,000 bodily injury per accident; $10,000 property damage per accident; $25,000 uninsured motorist per person; $50,000 uninsured motorist per accident

The above are only minimums. You need to evaluate the potential cost of being sued in an accident and whether you want to risk being held personally responsible for costs.

How Each Type of Coverage Works

Liability coverage pays for damages sustained in an accident. The coverage you purchase is to pay for the expenses of the other driver if you are found at fault.

The only exception to this would be in states which have no-fault insurance. In no-fault states, a person’s own auto insurance covers their expenses regardless of which driver is at fault.

Bodily injury coverage will provide coverage for medical expenses, compensation for pain, lost wages, and other expenses. Property damage coverage covers the cost of the other driver’s property.

If you are found at fault in an automotive accident that results in injury to both the other driver and their passenger, your insurance will need to pay their expenses. If you live in California, the minimum liability coverage is $15,000/$30,000/$5,000.

In the accident, the driver’s medical injuries cost $14,000 and the passenger’s $7,000. Both amounts total $21,000, which is under the “per accident” amount. Their automobile has $4,000 worth of damage, so again you are under the maximum on your policy and your insurance covers everything.

Now let’s take that same policy and consider an accident in which the other vehicle had a driver and three passengers. The total medical injuries for all four passengers total $45,000, and their vehicle requires $15,000 in repairs.

You are now $15,000 over your per accident maximum for bodily injury and $10,000 over the maximum for property damage. You will be liable for the $25,000 shortage in coverage and need to pay those expenses out-of-pocket. This is why you need to give serious consideration to paying for additional coverage. 

Where to Find Insurance Limits

The declaration page is the most important page of the policy. This is where the insurance company “declares” what coverage you do and do not have. It is where you will find how much coverage you have for each portion of the insurance, what your deductible is, the price you are paying, and other important information.

When looking at your declaration page check the following:

  • Personal information, including your address
  • Policy number
  • Names of persons the insurance covers when driving the vehicle
  • The vehicles on the policy, including their VIN number.
  • Schedule of coverages—items covered, limits, deductibles, and premium for each item
  • The policy period is the dates during which the policy is effective
  • Any discounts applied to the policy
  • Surcharges are additions due to things such as a recent claim or moving violation

The declaration page may consist of several pages, depending on how many vehicles you have. You will receive a new declaration page any time you add or remove a vehicle from your policy. You will also receive a new page each time you make a change in the amount of coverage or drivers.

If you find any errors in your coverage, you need to contact your insurance company immediately to have a correction made. Keep your insurance policy in a safe location for your own personal reference. In the event of an accident, your auto accident lawyer will need a copy for their file.

Insurance Policy Limits and Premiums

When you increase the amount of insurance coverage you have, your premiums will also increase. Decreasing limits will lower your premiums but you are then on the line for more money in the event of an accident. When considering how much insurance coverage you need look at your financial situation and whether you can afford the potential costs if a serious accident were to occur.

Auto Accident Assistance

If you are in an auto accident that results in bodily injury, you need a personal injury attorney. They have the experience and knowledge to understand insurance policy limits, declarations, accident liability, motor vehicle law, personal injury law, and more.

Contact Sweet Lawyers today for a 100% free, no-obligation consultation. There is never a fee unless we win your case. If you do not win, our services are free. Call us today at (800) 674-7854 or use our convenient online form.