Automobile Insurance Limits
Car insurance is a form of personal protection if you drive and a legal requirement in most states. But choosing the right policy is a matter of weighing many factors, from which company to go with to how much insurance to buy. Automobile insurance limits refer to the maximum amounts than an insurance company will pay in the event of a claim and the limits states set as minimums for all drivers.
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Liability Limits
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Some of the most important limits on an auto insurance policy refer to liability. Liability limits come into play when the policyholder causes an accident and either damages property or causes an injury to another driver or a pedestrian. The driver is liable for the cost of property repair and medical care, and liability insurance limits note the maximum amount that the insurance company will pay to compensate the victims.
Optional Limits
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Auto insurance policies often include optional forms of coverage that also use limits to note how much the insurance company will pay as a maximum benefit. Collision insurance covers the policyholder's own vehicle in the event of an accident where he is at fault. Drivers with newer vehicles should generally have higher collision limits than those who drive older models (if they want to pay for collision coverage at all). Comprehensive coverage applies to things such as vandalism, theft and fire damage. It also comes with a limit. In all cases, a higher limit means a higher annual premium for the policyholder.
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State Limits
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Each state has its own regulations for auto insurance, usually with a series of minimum policy limits. Liability is generally the only form of auto insurance that states require, but they place different limits on property damage, injury to one other person or injury to two or more people. For example, in California you must purchase an auto policy with at least a $15,000 liability limit for injury to one person, $30,000 for injury to multiple persons and $5,000 for property damage. Some states also require drivers to purchase uninsured motorist insurance, which applies when another driver without insurance causes an accident. However, states do not set minimum limits for uninsured motorist insurance.
Total Loss Limits
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In the case of certain claims, an auto insurance company won't pay the full amount of the policyholder's limits even if the claim exceeds them. This happens when the cost of repair to a vehicle is higher than the vehicle's market value. In such cases the insurance company can declare the car a total loss, or totaled, and give the policyholder a check for the car's actual value. Each insurance provider has its own methods for determining value, and policyholders may be able to argue for a higher value based on vehicle condition and mileage before the accident.
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- Photo Credit Crash on the street. German auto model 2007. image by Dariusz Kopestynski from Fotolia.com
