An insurance limit is the maximum amount your insurer will pay for a claim covered by your policy. In the event that you incur additional expenses after your insurance pays the maximum, you will be held personally liable. Since one insurance policy typically contains multiple types of coverage, you are likely to have more than one limit of insurance on a single policy. While some insurance companies will allow you to choose your own limit, you may need to comply with minimum coverage requirements set by state laws.
As you review an insurance policy, you may come across several types of limits of insurance, such as:
Car insurance policies typically consist of liability, comprehensive and collision coverages. Most states require a minimum amount of liability coverage for car insurance. Depending on your personal circumstances, you may want to consider increasing your liability limits by purchasing more coverage beyond your state’s minimum requirement.
When it comes to comprehensive and collision coverages, it is important to keep in mind that in an accident, your limits are equal to the actual cash value of your vehicle at that time. If your car is totaled in an accident, your policy may pay you a sum equal to the current value of the car after depreciation has been factored in.
The limits for home insurance policies can be customized according to your needs. Purchasing home insurance requires you to specify your preferred insurance limit for various types of coverage, such as dwelling and personal property.
In addition to having adequate coverage to protect your home, your personal property, and your temporary living expenses, you should ensure you have enough protection to cover any injuries or damage that might occur on your property.
In order to avoid the possibility of being sued and suffering a devastating financial loss, choosing the right limits of insurance is critical. However, keep in mind that higher insurance limits typically results in higher premiums. It can be tricky to find the delicate balance between purchasing enough coverage to protect you paying out of pocket, and not overpaying for additional coverage that you won’t use in the future. Get help choosing the best insurance limits for your needs by contacting an experienced insurance lawyer.