Auto Insurance Liability…What Does That Mean?
· by Matt Fox · posted March 3, 2008
· filed under Auto, Personal Insurance category.
I’ve found most people think that car insurance is mainly to protect and replace their car if it’s in an accident. While that is a very big part of the auto policy, the first part, and the part required by law, is liability insurance.
Now, the liability coverage is broken into two basic coverage definitions: bodily injury liability and property damage liability. Both pay for a specific damage type you would legally be responsible for if you are ‘at fault’ for the accident. Bodily injury liability pays when you hurt or kill someone and pay for their medical bills, loss of income, and other financial losses because of the injuries. Property damage liability pays when you run into and damage other people’s ’stuff’ (cars, houses, fence, light poles, etc.).
Your liability coverage can come as a combined singly limit policy or a split limit policy.
Combined single limit policies wrap the bodily injury and property damage into one coverage limit, say $500,000 for example (you choose your limit and Arizona only requires a very low $40,000). This means the most the policy pay for any damages to other people or their stuff is $500,000. Anything above that amount the other person can come after you personally.
Split limit policies split the bodily injury and property damage liability into two separate coverage limits. And, to make it even more confusing, they split the bodily injury coverage into a ‘per person/per occurrence’ maximum. To explain how this works it’s better by example.
Let’s use a split limit policy with bodily injury limits at $250,000/$500,000 and property damage limit is $100,000 for this example and you just hit a car with 3 people in it and injured them all. You policy will pay:
- No more than $250,000 for any one person but no more than $500,000 total for all people that are injured. So if two people max out the $250,000 then the third will come after you personally to get paid.
- No more than $100,000 to fix or replace the car or any other ‘stuff’ you run into and damage.
Is a split limit or combined single limit better? No. From a consumer standpoint, the combined single limit policy is much easier to understand and know where the policy would stop paying.
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