What is split limit coverage?
Split limit in car insurance policy plays a vital role, especially in liability coverage. You can go to “Car Liability Coverage” to learn more about this type of coverage. This coverage actually declares a different maximum amount that the insurance company will pay for different claims. Split limit coverage comes with three types of claims. The bodily injury per person, per accident and property damage per accident.
In other words, limits work when you take the bodily injury per accident, bodily injury per accident and the property damage coverage and you state all of them separately. So, when you look at your policy you can see something like this. 30/50/15.
What does 30/50/15 mean?
The first number, which is 30, is the amount of bodily injury that the company will pay out as a maximum “per person”. The second number 50, is the cap that will pay out “per accident”. So, if you involve yourself in a car accident. The insurer will pay up to $30,000 of damages per person. But, it’s capped at a total of $50,000 per accident. Lastly, the number 15. This means that the property damage is at the maximum of $15,000.
Take note that the example above is for explanation only and it’s also different depending on the person’s choice.
Let’s have an example to fully understand split limit coverage
Let’s say you cause an accident that results in the following damages:
- Johny – $40,000
- Ronnie – $7,000
- Ronnie’s Car – $4,000
You hurt Johny that results in bodily injury. Let’s say $40,000 are for medical bills and something related to bodily injury. You also hurt Ronnie, and it costs you $7,000 in damages you’re liable for. Lastly you also did $4,000 damages to Ronnie’s car.
Now, what we’re trying to figure out is. How the insurance company will pay out under the split limit. Let’s use the split limit above which is 30/50/15 in order to calculate the payout, given the damages you’ve done to Johny and Ronnie.
For Johny, it’s $40,000 in actual damages. But as you can see you only have a $30,000 limit per person. Take note that Johny’s bill is at $40,000, but he’s only going to get 30,000 in terms of damages because of that “per person” limit. The insurance company will pay out no more than $30,000 in bodily injury damages to any particular person from an accident.
“Bill could cost a million dollars and it would still be $30,000 that’s capped out with the split limit.”
Ronnie, on the other hand, has $7,000 in damages, and he doesn’t meet the 30 limit. Now we have to look at the middle number which is 50. That’s the total bodily injury that the insurance company will pay out no matter how many people get injured. Adding it all should be less than 50,000. So, let’s add the two numbers, we have $30,000 and $7,000 that gives us a total of $37,000. Since 37 is less than 50, then there’s no issue with the “per accident” limit.
Moving on to Ronnie’s car, the property damage limit is 15 or $15,0000. The damages to Ronnie’s car cost you $4,000. So, there’s no problem there, and there’s going to be a payout of $4,000 for Ronnie’s car.
The sum of $30,000 + $7,000 + $4,000 is equal to $41,000. The 41,000 value is the total amount the insurance company will pay out under the split limit coverage.
Note that using our particular limit we have that limit on Johny’s damages of $30,000 when in reality he has $40,000. That doesn’t mean that Johny is unfortunate due to the $10,000 short. Johny could potentially sue you and come after your assets to get you pay the remaining $10,000.
Advice in Terms of Split Limit
Accidents can happen without a warning. So, in terms of coverage. Insured Goals Team, strongly suggest making sure that you have adequate coverage. Especially when setting your limits.
We don’t want to jeopardize our assets. Having the right information about liability and split limits could actually protect us. To the people reading this article, if you can afford a high limit, then go for it. Because max coverage or high limit is going to be a helpful tool, maybe not now, but sooner or later it’ll become a hero that will save you.