Auto Insurance Limits: Everything You Need to Know

When it comes to auto insurance, there are many different factors to consider. One of the most important of these is the limit of liability coverage that you choose. This limit is the maximum amount that your insurance company will pay out in the event of an accident or other covered event. In this article, we’ll take a closer look at auto insurance limits, including what they are, how they work, and why they are so important.

What Are Auto Insurance Limits?

Auto insurance limits refer to the maximum amount of coverage that your insurance company will provide for different types of liability. There are several different types of liability that are typically covered by auto insurance, including:

These limits are usually expressed as two numbers, such as 100/300/50. The first number represents the maximum amount that your insurance company will pay out for bodily injury liability per person, the second number represents the maximum amount that they will pay out per accident for bodily injury liability, and the third number represents the maximum amount that they will pay out for property damage liability per accident.

How Do Auto Insurance Limits Work?

Auto insurance limits work by setting a cap on the amount of money that your insurance company will pay out if you are found to be at fault for an accident or other covered event. For example, if your bodily injury liability limit is $100,000 per person and you cause an accident that results in $200,000 in medical bills for the other driver, your insurance company will only pay out up to $100,000 for that claim.

It’s important to note that auto insurance limits only apply to liability coverage. Other types of coverage, such as collision and comprehensive coverage, have their own separate limits and deductibles.

Why Are Auto Insurance Limits Important?

Auto insurance limits are important because they determine the amount of financial protection that you have in the event of an accident or other covered event. If your limits are too low, you may be held personally responsible for any damages that exceed your coverage amount.

For example, if you have a bodily injury liability limit of $25,000 per person and you cause an accident that results in $50,000 in medical bills for the other driver, you could be held liable for the remaining $25,000. This could result in huge financial burden and could even force you to declare bankruptcy.

FAQ

How Do I Choose the Right Auto Insurance Limits?

Choosing the right auto insurance limits can be tricky, but there are a few factors that you should consider. First and foremost, you should make sure that your limits are high enough to provide adequate financial protection in the event of an accident. You should also consider your assets and income, as well as the likelihood of being sued.

What Happens If My Auto Insurance Limits Are Not High Enough?

If your auto insurance limits are not high enough to cover the damages in an accident or other covered event, you may be held personally responsible for the remaining amount. This could result in huge financial burden and could even force you to declare bankruptcy.

Can I Change My Auto Insurance Limits?

Yes, you can usually change your auto insurance limits at any time by contacting your insurance company. However, keep in mind that increasing your limits will typically result in higher premiums.

What Is Umbrella Insurance?

Umbrella insurance is a type of liability insurance that provides additional coverage beyond the limits of your auto insurance policy. This can be a good option for people who want extra protection in the event of a catastrophic accident or lawsuit.

Are Auto Insurance Limits the Same in Every State?

No, auto insurance limits vary by state. Some states require higher minimum limits than others, and some states require additional types of coverage, such as personal injury protection or uninsured motorist coverage.

Conclusion

Auto insurance limits are a critical component of your overall insurance coverage. By understanding what they are, how they work, and why they are so important, you can make sure that you have the financial protection that you need in the event of an accident or other covered event.

Remember, it’s always better to have more coverage than you need than to be caught without enough coverage when you need it most. If you’re unsure about your auto insurance limits, contact your insurance provider to discuss your options.