Liability Limits

Liability limits refer to the maximum amount an insurance company is legally obligated to pay for damages covered under a liability policy. These limits are set in the insurance contract and protect both the insured and the insurer from excessive financial loss.

In the context of auto insurance, liability limits typically cover:

• Bodily injury per person: The maximum amount paid for injuries to a single individual.
• Bodily injury per accident: The total maximum amount paid for injuries to all individuals in one accident.
• Property damage: The maximum amount paid for damage to another person's property in an accident.

If damages awarded by a court exceed these limits, the policyholder is personally responsible for paying the difference out of pocket, which can include assets like savings, property, or future income.

Most states require minimum liability limits, often around $25,000 per person and $50,000 per accident for bodily injury, and $10,000 for property damage. However, insurance experts commonly recommend higher limits, such as $100,000 per person and $300,000 per accident for bodily injury, and $50,000 to $100,000 for property damage, to better protect against costly claims and lawsuits.

In summary, liability limits define the financial cap on what your insurer will pay for covered claims related to injuries or damages you cause to others, and choosing adequate limits is crucial to safeguard your financial security.