Car insurance is one of those things that people hope they never use. Nevertheless, most drivers understand that having adequate coverage is imperative. Should an accident occur, or if someone’s vehicle is damaged due to a natural disaster, theft or vandalism, having sufficient insurance can mean the difference between paying hundreds or even thousands of dollars to cover the problem or maybe pay nothing at all.
The difficulty of interpreting car insurance terms
Do you find its terminology confusing when you receive your auto insurance bill? If so, you are not alone. Access Auto Insurance lists a sample 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’re getting 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 is important to review some other auto insurance terms that help create a complete picture of what constitutes a liability limit.
Liability insurance – The liability portion of your insurance bill is for accident costs for which you are responsible. In other words, you are responsible because you are responsible for the accident.
The first possible expense is associated with property damage. In other words, if you cause an accident that damages a nearby building or home, you need insurance to pay for the damage to those structures. You also need liability insurance to cover any legal costs you may incur if you are sued because of your accident. Finally, liability insurance is necessary to pay for their medical expenses if you cause an accident resulting in physical injury to someone.
The state you live in may have laws regulating the maximum amount insurance companies must pay, or your individual auto insurance policy will determine the maximum amount of liability insurance you have.
Bodily damage per accident maximum – Car insurance companies limit the amount they are willing or required to pay in the event of an accident. Maximum bodily injury per accident is the maximum amount an insurance company will pay per accident.
Bodily damage per person maximum – Sounds like maximum bodily damage per accident, but it’s not. For example, let’s say you have a policy that covers a maximum of $300,000 per accident, but your maximum bodily injury per person is set at $50,000. If you caused an accident that injured six people, each person would be covered for up to $50,000 of expenses.
If your accident injured seven people, your maximum of $300,000 per accident would come into play if they all claimed to have attempted to claim $50,000 of expenses. This is because $300,000 (your maximum coverage), shared equally among seven people, is less than $50,000 each.
Property Damage Limit – This term is relatively simple. This is the maximum amount your insurance company will pay for property damage after an accident for which you are responsible.
So if you see something like this, “60/100/30 are your liability limits” on your insurance policy, what it says 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 limit of liability coverage
Having the right amounts in terms of liability limit coverage is essential because if you cause an accident, you can 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 expenses exceed what your insurance company has to pay. The injured parties will receive partial compensation from the insurance company, but they have the right to sue you for the rest of their expenses. If they win their case in court, you will have to dip into your own savings account, investments, etc., to pay them damages.
If you are unsure of the amount of liability limit coverage you need, talk to your insurance agent about all the assets you own. They can help you determine how much liability limit coverage you need, so that all of your assets are protected.
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