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The typical auto insurance policy has three liability limitations that may be listed something like this: 25/50/25. Many consumers have no idea what these numbers represent, which is unfortunate, as they are critically important. These three little numbers can mean the difference between having enough coverage in any given situation, and being thrown into financial disaster.
The numbers listed above are the liability coverage limitations on your auto insurance policy. The first number, in this case 25, stands for the $25,000 dollars, which is the maximum your insurance policy will pay out to one person, when involved in an auto accident. This coverage is the amount of money that the insurance company will pay out for medical bills, bodily injury, and lost wages to any one person who was injured in an accident in which you were responsible. If the person incurs medical bills that exceed $25,000 dollars, you may be held responsible for paying the difference out of your own pocket.
The next number, in this example, 50, represents the $50,000 dollars that your insurance company will pay out per accident total, to all parties involved. So, if you run a red light and hit a car with four passengers inside, and each one of them is injured, your insurance company will pay out a maximum of $50,000 dollars total, to the four people in the other vehicle. Again, you may be held responsible for any monetary compensation that exceeds the $50,000 dollar limit on your policy.
The last number, again 25, stands for the $25,000 dollars your auto insurance policy will pay out for damage to another person’s automobile or personal property. For example; if you are found at fault in an accident that totals a $50,000 dollar car, and only have a $25,000 dollar maximum property damage limit, you may be held liable for the other twenty-five thousand dollars that the car is worth.
Too often, when a person is shopping for auto insurance, the liability portion of the policy is not properly explained to the consumer. In many cases higher limits of liability coverage are never even offered to the potential insured, even though higher limits are certainly available, and recommended by most auto insurance companies. Understanding that not all auto insurance policies are equal is very important when purchasing the right policy for your needs. Paying less money for a bare bones auto insurance policy is not likely to be in your best interest. Automobile insurance coverage is far too important to merely have low state minimum coverage limitations on your policy.
Most insurance companies encourage their insured’s to increase liability coverage to double or triple the state liability limits. When shopping for insurance coverage, or reviewing your current auto insurance policy, it is wise to review the liability limits that are available to you with your agent, and what the cost might be for increasing these limits. You will likely find that properly insuring yourself
