If you’re on the market for a new auto insurance policy, you’ve probably seen the term “split limit insurance” floating around.
To make sure you get the best coverage for your financial situation, you must understand exactly what split limits refer to.
As with many car insurance components, liability coverage is mandated in different amounts by each state. And while it’s required to meet the minimum coverage limit, as the policyholder, you have options as to how much or what type of liability coverage you purchase.
Split limit insurance refers to the amount your insurer will pay toward personal injury and property damage claims after an accident where you are at fault. In particular, the “split” breaks down how much can be paid out per accident and per person.
Getting the right car insurance policy means finding the right coverage at the right price for you. Understanding the impact of insurance coverage options, such as liability limits, deductibles, and other coverage, is just half the battle. The next step is finding the best rate.
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What is split limit insurance?
Split limit insurance refers to your liability insurance, which covers damages you cause to other parties in an at-fault accident. Every state has a minimum requirement of how much liability insurance you need to cover personal injury and property damage costs from an at-fault accident. Split limit liability insurance determines the maximum amount your insurance will pay to cover certain claims after your deductible.
Split limit liability insurance gets its name from how it works. As you shop around for car insurance quotes, you’ll likely see liability coverage options written as a three number split. This breaks your maximum coverage limits down into three categories:
- Bodily injury per person: This is the maximum amount your insurer will pay out for medical bills or medical expenses per person in a given accident.
- Bodily injury per accident: This is the maximum amount your insurer will pay out for medical bills or medical expenses per accident, based on the per person limit.
- Property damage per accident: This is the maximum amount your insurer will pay out for property damage coverage per accident.
So let’s look at an example of how this breaks down. Let’s say you have a split limit insurance policy of 100/300/50. This means you have the following limits:
- $100,000 maximum bodily injury coverage per person
- $300,000 maximum bodily injury coverage per accident
- $50,000 maximum property damage limit per accident
If you look at this coverage and think you’re guaranteed $450,000 maximum, think again. Split limit insurance restricts payouts to the maximum set per payout type. Let’s look at a few scenarios to illustrate how the maximum coverage amounts relate to each other.
- Scenario 1: After an accident, three passengers in the other vehicle each have $90,000 worth of personal injury claims. This would be covered because each person’s claim is within the $100,000 per-person limit, and the three claims total less than the per-accident limit for bodily injury.
- Scenario 2: After an accident, four passengers in the other vehicle each have $80,000 worth of personal injury claims. Looking at the per-person limit, you might think you have the right coverage amount: this falls below the per-person limit. However, since this policy caps bodily injury payouts at $300,000 total, the full amount ($320,000) would not be covered.
- Scenario 3: After an accident, two passengers in the other vehicle each have $120,000 worth of personal injury claims. Even though this is less than the $300,000 bodily injury limit for each accident, each injured passenger’s claim is higher than the per-person limit. This means the total amount wouldn’t be covered by this policy.
As you can see in scenarios 2 and 3, knowing how these two limits work together is very important in understanding your actual coverage and risk.
Combined Single Limit vs. Split Limits
Combined single limit insurance policies are slightly different from split limits. While split limits distinguish a maximum payout per person and per accident for bodily injury and property damage, a combined single limit is more like a lump sum coverage amount.
Combined single limit liability coverage sets a maximum payout amount for a single accident, no matter what the liability payout is for. So a $300,000 combined single limit insurance policy would cover up to that amount, whether it’s all property damage, all one person’s bodily injury claims, or a combination of the two.
Drivers who own property or other assets that could be at risk in a lawsuit benefit the most from a combined single limit policy. Even though this type of insurance comes with higher premiums, it can take the place of an umbrella policy and reduce the risk of having any gaps between a claim amount and your insurance limit.
On the other hand, combined single limit policies are generally more expensive than split limit policies. If you don’t have assets that could be at risk following a lawsuit, the lower insurance premium of a split limit insurance policy might better suit your needs.
Make Sure You’re Covered
Understanding your split limit insurance and finding the right liability coverage are just one part of finding the right auto insurance coverage for you. To make sure you get the best rate for the coverage you need, check out Insurify for personalized quotes. With Insurify, your single profile gets you quotes based on your driving history and coverage needs in just minutes so you can compare car insurance company options at a glance. Head on over to the Insurify quote comparison tool, and give it a try today.