In the United States, auto insurance limits are the pre-defined limits of the liability responsibility set in financial terms (dollar amounts) that the insurer will pay in the event of a claim. These limits will be laid out in the contract between the insurance company and the policy holder.
The insurer will set limits on the amount that can be claimed as a reflection of the overall risk of any given instance combined with the amount of premium that a client is paying for the level of coverage they receive.
There are many ways limits can be expressed in a policy and it is important that you understand how these may affect your claim or personal liability.
What is a per-claim limit?
A per-claim limit is the maximum amount of money that the insurer will pay out in the event of single claim, so for example if you have a $5,000 per-claim limit on your policy. And you have an accident which results in $10,000 worth of liabilities, you insurer will only pay $5,000 and you will have to make up the outstanding balance yourself.
What is a per-policy limit?
The per-policy limit may or may not be set at the same threshold as the per-claim limit, but it defines the maximum benefits that an insurer will pay out over the lifetime of the policy coverage period. So for example a policy may have a per-claim limit of $5,000 but a per policy limit of $20,000. Which means that you could file four claims for $5,000 each and then insurance company would pay the full value of each, but if you needed to file a fifth claim for $5,000 you would then need to pay the full amount yourself.
It is important to understand both of these terms regarding limits as they reflect the coverage that you will receive from your insurer in the event of an accident.
If you feel that your per-claim limit is too low, or that your per-policy limit is too low you should contact your insurance agent or insurance broker and ask them how you might amend these limits to offer an increased level of coverage for increased peace of mind. You will probably find that small increases in your premiums can dramatically affect policy coverage limits so don’t expect to have a huge increase in your payments for small improvements in the limits of your policy.