Auto Insurance Policy Limits
Auto insurance is a financial tool that helps protect you from financial loss caused by a motor vehicle accident. It can also prevent you from having to pay for repair or replacement of your car if it is stolen or damaged by fire, falling objects, theft, vandalism or weather. However, auto insurance is not limitless. Understanding your policy coverage limits can help you make sure your finances are properly protected.
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Liability Limits
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Liability coverage pays for injuries and property damage that others incur if you cause a motor vehicle accident. Most states require all automobile drivers to carry liability coverage to protect other drivers and their passengers. Liability limits for injury are typically expressed in terms of per-person/per-accident coverage. For example, a policy with bodily injury liability limits of $25,000/50,000 will pay up to $25,000 for one person's injuries, and up to $50,000 for all injuries caused by a single accident, regardless of how many people are injured. A policy with property damage liability limits of $25,000 will pay up to $25,000 for damage to other people's vehicles and personal property, regardless of how many vehicles are involved in an accident. Some companies also offer single-limit bodily injury liability, which pays up to the full limit for even just one person's injuries.
Uninsured Motorist Coverage Limits
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Like liability coverage, uninsured motorist coverage limits are typically expressed as per person/per accident, although some companies offer this coverage on a single-limit basis. This coverage pays for your injuries, as well as those sustained by your passengers, if you are hit by an uninsured motorist. Typically, you cannot purchase uninsured motorist limits that are higher than your liability limits. For example, if you carry liability limits of $25,000/50,000, you cannot purchase uninsured motorist coverage limits of $50,000/100,000.
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Comprehensive and Collision Limits
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Collision coverage is designed to pay for accident damage to your vehicle, regardless of whether another driver caused the accident. Comprehensive coverage, also known as "other than collision coverage," pays for damage to your car caused by theft, weather, vandalism, fire or collision an animal. The limit for both coverages is based on the market value of your vehicle at the time the accident or damage occurred. It is not based on the balance of lease or loan payments on the car -- if you owe more than the vehicle is worth at the time of the accident or damage, you are responsible for the difference. Also, comprehensive and collision limits may be reduced by a deductible, which is the amount of the damage you have to pay. You choose the deductible when you purchase these coverages -- it typically ranges between $250 and $1,000.
Medical Payments Limits
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Medical payments coverage is an optional coverage offered by most auto insurers. It pays for your medical expenses, as well as those of your passengers, resulting from a motor vehicle accident. The limit for medical payments is low, usually $5,000 or less. It may apply on a per-person or per-accident basis. Medical payments coverage is not designed to replace health insurance coverage; rather, it is designed to pay health insurance deductibles, co-pays and other expenses not covered under your health insurance policy.
Cost
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Your agent or company will offer you several limit options for liability, uninsured motorist and medical payments coverage when you purchase a policy. Generally, higher limits cost you more in insurance premiums; however, they provide better protection against financial loss.
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