Limits Of Liability

Limits of Liability in the context of insurance, specifically Auto Insurance, refer to the maximum amount an insurance company will pay for covered losses in a policy. These limits are typically split into two parts: Bodily Injury Liability limits, covering injuries to others, and Property Damage Liability limits, covering damage to someone else's property.

Example #1

If you have a Bodily Injury Liability limit of $50,000/$100,000, it means your insurance will pay up to $50,000 per person injured in an accident, with a maximum of $100,000 total for all injuries in that accident.

Example #2

For Property Damage Liability limits, if you have a limit of $50,000, your insurance will pay up to that amount for damage caused to another person's property in an accident.

Misuse

Misuse of Limits of Liability can occur when consumers opt for low limits to save money on premiums but end up underinsured in the event of a serious accident. If someone causes an accident resulting in significant injuries or property damage and their limits are insufficient, they could be personally responsible for the remaining costs.

Benefits

Having adequate Limits of Liability provides peace of mind and financial protection in case of unexpected accidents. It ensures that you have sufficient coverage to handle potential claims against you in a worst-case scenario.

Conclusion

Understanding and selecting appropriate Limits of Liability is crucial in protecting yourself and your assets. It's important to balance affordability with sufficient coverage to mitigate risks in the event of accidents.

Related Terms

Uninsured Motorist CoverageUnderinsured Motorist CoverageBodily Injury LiabilityProperty Damage Liability