Understanding Split Limit Auto Insurance Coverage And Its Benefits

Split-limit auto insurance, also known as split liability insurance, is a type of insurance policy that divides the maximum coverage amount into three separate categories: bodily injury per person, bodily injury per accident, and property damage per accident. This means that the policy will have different maximum payouts for each category, often written as three separate numbers, such as 25/50/25. The first number refers to the maximum payout for bodily injury per person, the second to the maximum payout for bodily injury per accident, and the third to the maximum payout for property damage per accident. For example, a policy with limits of 25/50/25 will cover up to $25,000 per person for bodily injury, up to $50,000 for all persons injured, and up to $25,000 for property damage.

Split limit vs. combined single limit

When you buy auto insurance, you can choose between a combined single limit (CSL) and a split limit liability policy. Both types of insurance policies cover liability for bodily injury and property damage, but they differ in how the coverage is structured.

Combined Single Limit

A combined single limit policy provides a single dollar amount of coverage for both property damage and bodily injury liability. This means that the insurance company will pay out up to the maximum amount stated in the policy, regardless of how much is needed to cover property damage or bodily injury. For example, if you have a CSL policy with a limit of $300,000 and cause an accident that results in $260,000 worth of damage, your insurance company will cover all the costs. This includes $30,000 to each of the two people whose cars were damaged and $100,000 to each of the two people who were injured.

Split Limit

A split limit policy, on the other hand, separates the maximum dollar amount of coverage between property damage and bodily injury liability. It also has different limits for each person injured and each accident. Using the same example as above, a split limit policy of 100/300/50 would cover $100,000 per person injured, $300,000 total for all injuries, and $50,000 for property damage. In this case, the policy would not be sufficient to cover all the property damage claims, as the limit is only $50,000, but it would cover all the bodily injury claims.

Advantages and Disadvantages

There are advantages and disadvantages to each type of policy. A CSL policy is simpler and provides more flexibility in how the coverage is used. It also tends to be preferred by drivers with high net worth, a business, or assets they want to protect. On the other hand, it is more expensive than a split limit policy. A split limit policy is more common and may be preferred by drivers who want to save on insurance premiums but still have adequate coverage. However, it can be more complicated and may result in gaps between actual claims and coverage limits, potentially leading to personal injury lawsuits against the policyholder.

Per-person coverage

The per-person coverage limit is important because it sets a cap on the amount of money that an injured person can claim from the policyholder's insurance company. If the per-person limit is too low, the policyholder may be personally liable for any additional expenses incurred by the injured party.

It is worth noting that bodily injuries often cost more than property damage, so it is generally recommended to consider higher limits for bodily injury coverage. Additionally, drivers should consider their state's minimum coverage requirements and their own financial situation when selecting a policy.

In summary, per-person coverage in a split limit auto insurance policy refers to the maximum amount the insurer will pay for bodily injury claims per person in an accident. This coverage is an essential component of financial protection for drivers, helping to ensure that they are not held personally liable for excessive medical expenses resulting from an accident.

Per-accident coverage

In the context of split limit policies, per-accident coverage is the second of three dollar amounts that apply to each accident. The first limit is the per-person coverage, and the third limit pertains to property damage per accident.

For example, consider a split limit policy with limits of 100/300/50. In this case, the per-accident coverage is $300,000. This means that the insurance company will pay a maximum of $300,000 in total for all injuries sustained by multiple people in a single accident. If only one person is injured in the accident, the per-person limit of $100,000 will apply. On the other hand, if three different people each have $100,000 in claims, the per-accident limit of $300,000 will be reached.

It is worth noting that split limit policies tend to have lower premiums because they offer narrower insurance coverage compared to combined single limit policies. As a result, insured parties may need to consider broader coverage options, such as combined single limit or umbrella liability policies, if the coverage under a split limit policy is insufficient for their needs.

Property damage coverage

Most states require a minimum amount of property damage liability coverage, but it is worth considering buying more than what is required to offer greater financial protection. The amount of coverage you need depends on factors such as whether you own a home or other expensive items, whether you usually drive in high-traffic areas, and whether there are a lot of expensive vehicles in your area.

When choosing a policy, it's important to understand the limits of your property damage coverage. In a split limit policy, the third number represents the maximum amount the insurer will pay for property damage per accident. For example, in a 100/300/50 split limit policy, the insurer will pay up to $50,000 for property damage. If the cost of damages exceeds this amount, you will be responsible for the remaining cost. You can choose a higher limit for this coverage to ensure you are adequately protected in the event of an accident.

Property damage liability coverage typically has a "per accident" limit and no deductible. This means that the coverage pays out after an accident for which you are at fault, but only up to the amount stated in your policy. If the damage you cause exceeds your policy limit, you will be responsible for the remaining cost.

Choosing the right policy

Choosing the right split limit auto insurance policy depends on several factors. Firstly, it's important to understand the basic structure of a split limit policy. This type of policy has three components: bodily injury per person, bodily injury per accident, and property damage per accident. Each of these components has a maximum dollar amount that the insurer will pay out in the event of a claim.

When choosing a policy, consider the potential costs of medical expenses and property damage in the event of an accident. While higher limits for bodily injury coverage may be desirable, it's important to balance this with the need for sufficient property damage coverage. Keep in mind that bodily injuries often cost more than property damage, so consider opting for higher limits in this area. Additionally, take into account your state's minimum insurance requirements and ensure that your policy meets or exceeds those standards.

Another factor to consider is the number of people who could potentially be involved in an accident. The "per person" limit in a split limit policy refers to the maximum amount the insurer will pay for a single person's injuries. If multiple people are injured in an accident, the "per accident" limit comes into effect, which is typically higher. Evaluate the likelihood of multiple-vehicle accidents and the potential number of people involved when selecting your coverage limits.

It's also essential to assess your financial situation and assets when choosing a policy. Consider what you can afford in terms of premiums, as well as the potential out-of-pocket expenses you could face if the limits of your policy are exceeded. Evaluate your net worth and choose coverage limits that provide adequate protection. Additionally, think about whether you may benefit from additional types of insurance, such as comprehensive, collision, or roadside assistance coverage.

Finally, weigh the benefits of a split limit policy against those of a combined single limit (CSL) policy. A CSL policy provides a single liability limit for all injuries and damages sustained in an accident, offering more flexibility in how the funds are used. While CSL policies tend to be more expensive, they may provide broader coverage in certain scenarios, especially when medical bills are high or when property damage is extensive.

By carefully considering these factors, you can make an informed decision when choosing the right split limit auto insurance policy for your needs.

Frequently asked questions