Advantages and Disadvantages of Split Limit Liability

Traditionally split limit liability has been the method used to determine liability coverage maximum claim payments. However, there are both advantages and disadvantages to this approach to auto insurance liability coverage that should be considered when purchasing car insurance.

Split Limit Liability versus Single Limit Liability

Split limit liability insurance coverage is the type of liability insurance coverage that most of us have become familiar with over the years. The policy provides 3 numbers on coverage limits—an amount for bodily injury claims per person involved in an accident, an amount for bodily injury for the entire accident and an amount for total property damage.

Single limit liability, in contrast, provides one total limit for all 3 aspects of an accident, no matter how many people are involved in the accident and what the total property damage is for the event.

Advantages of Split Limit Liability Coverage

One of the primary advantages of split limit liability is that very often it is much less expensive coverage than single limit liability coverage. For individuals who are looking for ways to save money on their auto insurance, a traditional split limit coverage policy may be much more attractive than a much more expensive option like single limit coverage.

Another benefit to choosing split limit liability coverage is that it is one method of cost containment for payouts for accidents. Claimants may simply choose not to press for higher claims because of the policy limits that a split limit policy provides. The temptation for a claimant (or claimant’s attorney) to pad a bill in an attempt to collect the maximum limit may be removed simply because the limits will be lower with a split liability coverage policy.

Disadvantages of Split Limit Liability Coverage

The disadvantages of a split limit liability coverage auto policy are substantial. In today’s economy, the limits provided by traditional policy limits may simply be inadequate to cover all of the expenses involved in an auto accident. For example, for property damage alone, car values often top higher than $50,000 or more. If an accident involves more than one car, then the claim can skyrocket beyond belief. Add to that the potentially astronomical costs for any major medical treatment and it quickly becomes obvious that split limit liability coverage will most likely prove woefully inadequate for any sort of major accident.

When limits are expended, it is possible for major assets like a business or home to be at risk should a claimant decide to file a personal injury law suit. Even if a homeowner has an additional umbrella insurance policy, this is an additional expense that they incur every time they renew their policy.

Advantage of Single Limit Liability

The primary advantage of a single limit liability auto insurance policy is that usually the total damages and bodily injury expenses do not exceed the limits of the policy. Since there is one large lump sum that can be divided between the various expenses, it is possible to divvy up the liabilities however necessarily until the total limit is reached. This protects the assets of the policy holder without the unnecessary expense of an extra umbrella insurance policy to protect a home or business.