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Car Insurance Limits: What Do They Mean?
Often when I have talked with people about car insurance it seems like they have no clue what the limits of their policy are, or they just say I have full coverage so I don't have limits. Every policy has limits so it would be in your best interest understand them. This article will try and educate readers about the limits on their car insurance, and how important they are.
If you want to see what your limits are you need to look at the deceleration page of your policy. Basically its a summary page and is usually available online for most major insurance companies. Your limits will look something like this
BI (Bodily Injury) 25,000/50,000
PD (Property Damage) 50,000
UMBD (Uninsured Motorist Bodily Injury) 25,000/50000
UMPD (Uninsured Motorist Property Damage) 50,000
There are other things that may be included as well, such as rental car, or any other feature than you have on your policy.
The bodily injury category means that if you are at fault for an accident, the policy will pay up to $25,000 per person for medical bills, pain and suffering etc. Up to $50,000 per accident.
The property damage category means the policy will pay up to $50,000 for any property damage you caused. This would include damage to the other persons car, if you hit a guard rail, crashed into a building etc.
The uninsured motorist bodily injury is designed to protect you the policy owner. If you are hit by someone who has no insurance, or if the person fled from the accident then this coverage would pay for your and your passenger's injuries
The uninsured motorist property damage is the same as the uninsured motorist bodily injury, but it covers any property damage by the uninsured motorist.
Comprehensive coverage covers your car from things like hail, vandalism, theft, flood, or the most popular collision with an animal. The $500 is called your deductible, meaning when a comprehensive claim is filed you pay the first $500 and the insurance company pays the rest.
Collision works the same what they comprehensive does meaning you pay the deductible first then the insurance company pays the rest. But collision is what pays for your car to be fixed in an accident where you are at fault.
What is at risk
The limits of your insurance is one of the main factors in determining the rate you pay so many people are hesitant about raising the limits of their policy. But many people do not understand what is at risk if an accident goes over their limits and they can't pay the rest. The available actions vary by state but most often they will seize your checking and savings accounts first, then go to investments, 401k, college savings plans, stocks, bonds etc. If all of that isn't enough they can start claiming your personal property, your house, car, any expensive collections you have and auction them off. And lastly they can garnish your wages up to 25% if necessary.
Determining your limits
May people ask how they should go about determining what limits they should have on their policy. The best thing to do is research for your area. Look online for car accident data for your area, such as the number of accidents per year, the average cost of an accident, the average cost of cars in your area. You can also contact a local insurance agent for relevant information, but they will most likely try and convince you that your limits need to be higher.