What is a policy limit? A policy limit is the maximum amount of money an insurance company will pay to cover your claim. Your policy limit may vary depending on several factors, such as the insurance provider, your risk level, and how much you pay per month.
The purpose of a policy limit
A policy limit can help an insurance carrier manage its financial risk exposure by establishing the maximum payout the carrier will cover for claims filed.
Different types of policy limits include:
- Per-person limits: The maximum amount of money that may be paid for one person’s accident-induced injury.
- Per-accident limits: The maximum amount of money that may be paid to everyone involved in the accident for accident-induced injuries.
- Property damage limits: The maximum amount of money that may be paid to cover property damage due to an accident.
- Per-occurrence limit: The maximum amount of money an insurance carrier may pay for a single claim.
- Aggregate limit: The total amount an insurance company might pay for multiple claims during a set policy period.
How a policy limit works
If your claim exceeds your policy limit, you may be responsible for paying the difference. For example, if you have a policy limit of $50,000 and you are found at fault for an accident that results in $100,000 in damages, you might be required to pay the remaining $50,000 out of pocket.
If you're not at fault, the other party’s insurer may be responsible for helping to cover the damage. Typically, both parties' insurance companies negotiate with one another to reach a settlement that’s within the insurance policy limit. If that doesn’t work, the not-at-fault party may sue the at-fault party for the remaining amount.
Reading your car insurance policy closely may help you understand your policy limits. If your current policy doesn’t meet your needs, you may want to find an auto insurance policy that offers higher coverage.
Learn more about policy options
Infinity Insurance Agency, Inc. (IIA) works with insurance carriers that offer a range of auto insurance policies with various limits. Our Spanish-bilingual agents can help you find the right insurance provider for your needs.
Discover your policy options today with a free online quote or call 1-855-478-3705.