Auto insurance is one of the most essential financial protections you can have as a driver. But understanding the details of your policy, especially your coverage limits, is crucial for ensuring that you’re adequately protected. Your coverage limits represent the maximum amount of money your insurance will pay out in the event of a covered loss. Once these limits are exhausted, you will be responsible for covering any additional costs out of pocket.
If you’ve ever been involved in a car accident, you know how quickly expenses can add up. That’s why it’s important to understand the different types of coverage and how your auto policy limits work. By reviewing your policy periodically, you can ensure that your coverage limits align with your needs and give you peace of mind.
What Do My Auto Limits Cover?
Auto Liability Coverage Limits
Liability coverage is the foundation of your auto insurance policy and the only type of coverage required by law in every state. This coverage helps pay for the costs associated with damage or injuries you cause to others in an accident where you’re at fault. It’s typically broken down into two key components:
- Bodily Injury: This coverage helps pay for medical expenses, lost wages, pain and suffering, and other costs for the other driver and their passengers if you are at fault in an accident.
- Property Damage: This covers the cost of repairing or replacing the other person’s vehicle or property that is damaged in the accident.
For example, an auto liability coverage limit may be written as 100/300/50, which means:
- $100,000 for bodily injury per person,
- $300,000 total for bodily injury per accident,
- $50,000 for property damage per accident.
Example Scenario: Liability Coverage in Action
Let’s look at an example to see how liability coverage limits work:
Suppose you cause an accident where the other driver and passenger are both injured. If your policy has minimum liability coverage of $25,000/$50,000/$25,000, you’ll be covered for $25,000 per person in bodily injury. So, if the driver has $20,000 in medical expenses and the passenger has $15,000, your policy will cover both of those amounts since they fall within your limits. The total for bodily injury is $40,000, which is below your $50,000 limit for the accident, so there are no out-of-pocket expenses for those damages.
However, if a third passenger is involved and each of the three passengers sustains $25,000 in injuries, your liability coverage will only pay up to $50,000 for bodily injury, leaving you with $25,000 in uncovered costs. Additionally, if the other car sustained $30,000 in property damage and your policy’s $25,000 limit only covers part of it, you could be responsible for the remaining $5,000. In this case, you’d be on the hook for $30,000 in total damages.
Uninsured and Underinsured Motorist Coverage
If you’re involved in an accident caused by a driver who doesn’t have insurance, Uninsured Motorist (UM) Coverage can help pay for your injuries and property damage. Some states require this coverage, while others do not. This coverage works similarly to liability limits, with per person and per accident limits, such as 100/300.
But what happens if you’re in an accident with a driver who has some insurance but not enough to cover all your expenses? That’s where Underinsured Motorist (UIM) Coverage comes into play. UIM coverage helps cover the gap when another driver’s insurance limits are insufficient to pay for your medical bills and property damage. At TraumaLaw, we combine both UM and UIM coverage into one seamless option, so you’re never left with a huge bill if the other driver’s coverage falls short.
Collision Coverage Deductible & Limits
Collision Coverage is optional but useful coverage for damage to your vehicle caused by a collision, whether with another car or an object. The limit for this coverage is typically the actual cash value of your vehicle, which takes into account depreciation. Collision coverage also includes a deductible, which is the amount you need to pay before your insurance steps in to cover the claim.
Common deductible options are $250, $500, or $1,000. Your vehicle’s value and your comfort with paying out of pocket should guide your decision on which deductible to choose.
Comprehensive Coverage Deductible & Limits
Similarly, Comprehensive Coverage is optional and protects against non-collision incidents, such as theft, fire, vandalism, or damage caused by animals. Like collision coverage, comprehensive coverage has an actual cash value limit and includes a deductible. You can typically choose from deductibles like $250, $500, or $1,000, depending on your needs.
