Car insurance is one of those things that people never hope to use. Nevertheless, most drivers understand that it is imperative to have adequate coverage. If an accident happens, or if someone’s vehicle is damaged as a result of a natural disaster, theft or vandalism, adequate insurance can make the difference between paying hundreds or even thousands of dollars to cover the problem or perhaps paying nothing at all.
The difficulty in interpreting car insurance terms
Do you find the terminology confusing when you receive your car insurance bill? If so, you’re not alone. Access Auto Insurance provides an example of some of the confusing insurance terms you may see on your policy.
However, from a driver’s perspective, it’s important to understand what you get when you pay for insurance. You want to make sure you’re adequately covered and aren’t paying for coverage you don’t need.
What is Limit of Liability Coverage?
To understand the definition of liability coverage limits, it’s important to review some of the other auto insurance terms that play a role in creating a complete picture of what a liability limit entails.
Liability insurance – The liability portion of your insurance bill covers accident costs for which you are responsible. In other words, you are liable because you are responsible for the accident.
The first possible expense is related to property damage. In other words, if you cause an accident that damages a building or house nearby, you will need insurance to cover the damage to those buildings. You will also need liability insurance to cover legal costs you may incur if you are sued over your accident. Finally, liability insurance is necessary to pay their medical bills if you cause an accident that leaves someone physically injured.
The state in which you live may have laws governing the maximum amount that insurance companies must pay, or your individual auto insurance policy determines the maximum amount of liability insurance you have.
Personal injury per accident maximum – Auto insurance companies limit the amount they are willing or obligated to pay if an accident occurs. The annuity insurance per accident is the maximum amount that an insurance company pays out per accident.
Bodily injury per person maximum – This sounds like maximum bodily injury per accident, but it is not. Let’s say you have a policy that covers up to $300,000 per accident, but your personal injury per person is capped at $50,000. If you cause an accident that injures six people, each person is covered for up to $50,000 in expenses.
If your accident injured seven people, your max of $300,000 per accident would come into play if they all claimed to claim $50,000 in expenses. This is because $300,000 (your maximum coverage), split evenly between seven people, is less than $50,000 each.
Property Damage Limit – This term is relatively simple. It is the maximum amount your insurance company will pay for property damage following an accident for which you are at fault.
So if you see something like this, “60/100/30 are your limits of liability” on your insurance policy, the statement is the maximum your insurance company will pay for bodily injury per person ($60,000), bodily injury per accident ($100,000 ), and property damage ($30,000). These are your limits of liability.
How to make sure you have full liability limit coverage
It is essential to have the correct amounts in terms of liability limit coverage because if you cause an accident you could be sued for any expenses that exceed the liability limits stated in your insurance policy. For example, if you cause an accident, injured parties may decide to sue you personally when their costs exceed what your insurance company has to pay. The injured parties receive partial compensation from the insurance company, but they have the right to sue you for the remainder of their costs. If they win their case in court, you will need to use your own savings account, investments, etc. to pay them damages.
If you’re not sure how much limit of liability coverage you need, talk to your insurance agent about all the assets you own. They can help you determine how much you need in terms of liability limit coverage so that all of your assets are protected.
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