How car insurance liability limits work

Written by Penny Gusner on October 9, 2014 & Posted in Auto Insurance

If you own a car, you should know that the main auto insurance coverage required by most all states is liability insurance and also have purchased it for your vehicle. Liability car insurance is necessary because it covers damages you cause to others when you're found at fault in an accident.

Liability auto insurance, however, may not cover all the damages you have caused; it depends upon the limits you've chosen for this portion of your car insurance policy.

If you picked low limits, it's likely they can be exceeded in a minor accident and most certainly in a severe crash. For this reason, you must understand how liability limits work and which limits are best for your situation.

A common liability limit combination is 25/50/25. The first two numbers tell you the amount of bodily injury liability you carry. In this case that would be $25,000 per person and $50,000 per accident. Thus, the maximum one person could receive for his or her injuries is $25,000, with the most your bodily injury coverage will pay out for all injured parties is $50,000.

So, if you injure a driver and two passengers in another vehicle, all can claim under your bodily injury car insurance coverage. However, if some medical expenses go above the per person limit, your auto insurance company won't cover that amount, nor will it cover if the total of all three individuals' medical costs are over your top limit.

The third number of 25/50/25 stands for your property damage liability limit, here it being $25,000.

Just as bodily injury coverage only covers others outside your vehicle that you have injured, property damage liability only covers damage you cause others, not your vehicle in any way. To protect your own vehicle you need physical damage coverages of collision and comprehensive.

While $25,000 may seem like a decent amount, if you crash into only a moderately expensive vehicle your limit could be exceeded paying for repairs or the total loss of the vehicle. Also, if you're unlucky enough to strike multiple vehicles, your $25,000 limit could easily be surpassed before all car owners even file their claims.

Remember you personally are responsible once car insurance claim amounts go over your auto insurance liability limits. Thus, low liability limits leave you - and your assets - at risk.

To better protect yourself choose higher liability limits (100/300/50 is recommended). In general, it doesn't cost that must more to raise your liability limits, so before saying you can't afford it, get car insurance quotes and find out. It's likely cheaper than you thought.

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