Auto Accidents: What Does “Policy Limits” Mean?
Whether talking to clients or providing information on this website, we often talk about the other driver’s “policy limits.” What does that phrase mean?
Every insurance policy has a maximum amount that the insurance company will be required to pay, regardless of the severity of the injuries suffered by people in the wreck. This maximum amount is referred to as the “policy limits.”
In most instances, you will see or hear policy limits referred to with two numbers — the per person and per occurrence limits. For example, current law requires Texas drivers to carry insurance with limits of at least $30,000 per person and $60,000 per occurrence.
The first part of that is fairly easy to understand — in an example like that, the most the insurance company could be required to pay any single person in a wreck is $30,000.
The second part is more tricky. The “per occurrence” limit is that maximum that the insurance company could be required to pay in total, regardless of the number of people injured in a wreck.
For example, if two people are injured in a wreck, the insurance company couldn’t be forced to pay either of them $30,000 and couldn’t be forced to pay a total to them of more than $60,000.
This applies regardless of the number of people hurt. If someone with a $30,000/$60,000 policy causes a ten car pile-up that injures fifteen people, the insurance company is not required to pay more than $60,000 in total to all of the injured people.
While $30,000/$60,000 is the minimum allowed by law, those amounts may increase. It is not unusual to find policies that are $50,000/$100,000 policies or even $100,000/$300,000 policies. But policies much higher than that are very rare except in cases involving commercial vehicles.