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Carry Enough Limit

On the surface having a limit of $100,000 on your policy may seem adequate. Everything costs more nowadays. The cost of building materials, cars, and medical expenses keep rising. $100,000 of a combined single limit may not even cover half of a major accident where you are at fault. 

Some states offer liability coverage as a combined single limit. Split limit options for insurance can be purchased as one limit for bodily injury liability, one limit for property damage liability and an aggregate for all limits combined. A combined single limit is a combined limit for bodily injury and property damage liability which also equals the total aggregate. Depending on how your limits are set up, they may not be enough.

A policyholder has a personal automobile policy with a combined single limit of $100,000. The policyholder is involved in an accident where they failed to come to a stop at a red light, striking another car sending that vehicle into a house causing extensive damage to the house and the car, and sending the other driver to the hospital with a severely fractured leg. The car wasn’t an extremely pricey model, but it was only a few months old and was a total loss which will cost $30,000. The house inflicted heavy structural damage and will cost $50,000 to repair. The injured driver sued for bodily injury and pain and suffering and was awarded $50,000, the $100,000 limit has been exhausted. A combined single limit will pay up to $100,000 for bodily injury and/or property damage liability, if combined the total is under $100,000, but no more. The difference will come out of the policyholder’s pocket. The overall limit of $100,000 in the end was not enough coverage. A combined single limit set-up like this could be sufficient in a different scenario and more beneficial over a $50,000 bodily injury limit, $50,000 property damage limit with a $100,000 aggregate. Using this same claim scenario but with lower claim judgments a $100,000 combined single limit could cover the damages. A lower valued car, and a less damaged house resulted in only $15,000 in property damage, yet the other driver was awarded $80,000 for their injuries.  With split limits the property damage would be covered but the bodily injury would come up short, since only $50,000 would go towards bodily injury liability, the policy can not borrow the needed extra amount from the unexhausted property damage limit.     

Regardless of how a policy’s limits are set, be it a combined single limit to satisfy both property damage and bodily injury, or split limits with separate limits for bodily injury and property damage, you should have enough to cover serious claims. It is surprisingly inexpensive to increase limits from $100,000 to $500,000 to even $1,000,000, and any insurance agent would be happy to quote such options. Pay a little extra now to save a whole lot later.       

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