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What Are Car Insurance Policy Limits?

Oct 30, 2023 | Auto Accident, Insurance Dispute

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Car Insurance Policy Limits

Although people drive every day on work commutes, shopping trips, and social outings, almost no one expects to be the victim of a motor vehicle accident. It’s more common than you’d think; Indiana actually made the list of the top 10 states with the most car accidents in 2022. 

One way you can be prepared in the event that you’re involved in a crash that isn’t your fault is to familiarize yourself with the concept of policy limits and how they will affect your accident. This way, if you decide to pursue legal action and compensation for damages, you will already have a head start in assessing what your case is worth.

A Policy Limit in Simple Terms

A policy limit is the maximum amount an insurance company will pay for a policyholder in the event of an accident. It’s not necessarily what the insurance company will actually cover if you get in an accident; it’s just the absolute most that they would cover. While each state sets a minimum policy limit that every policy has to meet, it is possible to have policies that cover more, and you should select a policy that reflects your circumstances. The value of your assets, your budget, and how much risk you’re willing to take are all factors that inform what limits will meet your needs.

What Are Split Limits?

Although policy limits can be expressed as a single number, it is more common to have what is called “split limits.” Under a split limit, there will be a different maximum for different types of damages; for example, rather than there being a $50,000 maximum, there may be a $25,000 maximum to cover bodily injury and a $25,000 maximum to cover property damage. Split policy limits are usually expressed as a series of three numbers. In order to explain how these numbers work, let’s break down a hypothetical 50/100/25 split limit.

  • The 50 means that the insurance company will cover up to $50,000 in bodily injuries per person. That means that if you hit a car and injure two people, the insurance company will pay up to $50,000 per person. In this example, if one person has $35,000 in medical bills and the other has $42,000 in medical bills, then the insurance will cover the damages for both injured parties. However, if one person has $75,000 in damages, then the insurance company would not cover that money.
  • The 100 represents how much the insurance company will pay per accident. Use our prior example of getting in a car accident and injuring two people, but imagine this time there is a third person injured. If that person had $49,000 worth of medical bills, then, even though it’s less than $50,000 per one person, the insurance company wouldn’t cover all of the damages because they exceed the $100,000 per accident.
  • The 25 is how much the insurance company would cover in property damage per person. It works similarly to the limit on covered bodily injury damages; if you cause $20,000 worth of property damage to another vehicle in an accident, then your insurance company will be able to cover the damages for you completely, as they fall beneath your policy’s $25,000 property damage limit.

Policy Limits in Indiana

Each state requires certain minimum liability limits, and the exact numbers vary between states. In Indiana, the minimum liability limits are 25/50/25, meaning that policy limits must at least cover $25,000 for bodily injury, $25,000 for property damage, and $50,000 for underinsured motorist bodily injury. The Insurance Information Institute also provides a list of minimum policy limits by state so you can see how Indiana’s regulations measure up to the rest of the country.

How Do Policy Limits Affect My Accident?

Although it’s good to understand these numbers and what they mean, it’s more important to know how they might affect you in practice. However, the effect a policy limit has on the accident you’ve been in depends heavily on what your involvement in that accident was. 

To know what a policy limit means for your case, you need to determine whether you are:

  • The liable party. If you are at fault for the accident you were in, then your policy limit reflects the amount of money that your insurance company will pay for damages.
  • The injured party. If you are not at fault for the accident you were in, then the policy limit reflects how much the at-fault party’s insurance company will pay you. When you are not at fault for an accident, policy limits can be a frustration, as they can result in you receiving less help for your damages – especially if you were in a wreck with multiple vehicles.

Injured in an Indiana Auto Accident? Call Stewart & Stewart Attorneys

Did you or your loved one suffer a car crash in Indiana? The Team at Stewart & Stewart Attorneys is here to fight for your rights and work hard to bring your car crash case to a fair resolution. Don’t wait; call 1-866-925-3011 24/7/365 or contact us online for a free consultation with an experienced vehicle accident attorney. You only pay when we win.

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