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Limits
Michael Vitale 104 Interchange Plaza, Suite 102 Monroe Township, NJ 08831 Cell: 201.306.5988 Office: 609.655.3066 x255 Fax: 609.655.4959 Email: michael@vitaleinsurance. com Website: www.vitaleinsurance.com
Did you know that you have a choice regarding your liability limits when creating your auto insurance policy? If you answered “no”, then you would be among many people who do not realize they have a “say” in choosing their limits. There are actually two categories of liability limits: Combined Single Liability
Coverage or Split-Limit Liability Coverage. Please allow me to briefly explain the major differences, as well as some positive and negative aspects of both limit options. Combined Single Limit Liability (“CSL”) provides one monetary figure - or limit - which is the maximum insurance payout for
ALL AROUND OLD BRIDGE bodily injury or property damage from a single accident. This limit remains the same, regardless of how many individuals or vehicles are involved in a single accident. A Split Limit Liability (“SLL”) provides a stated monetary payout limit, per person, per accident, and also a separate and specific payout limit for property damage. If multiple parties are injured in a single accident, each individual would have their own limit, and there would be a separate payout for any property damage. Currently, a common CSL is $300,000 and a comparable SLL is 100/300/100 ($100K per person, $300K per accident, $100K property damage). In real-life situations, how do they compare? Let’s take the following examples: Mary is a driver involved in an accident. She is at fault and the other driver, Bob, sustained injuries totaling $125K. Additionally, the property damage totaled $110K. If Mary had a $300K CSL, it would sufficiently cover all damages related
JANUARY 2018 to this accident. However, if Mary had an SLL, 100/300/100, her policy would only cover Bob’s injuries up to $100K (leaving her responsible for $25K) and property damage up to $100K (leaving her responsible for $10K). Mary would be responsible for $35K related to this accident. In this case, a CSL would be most effective and beneficial to Mary. Now let’s change the example and say that Mary was at fault in an accident where she ran into Joe’s car with two other passengers, all of whom sustained injuries of $95K, along with $90K property damage. A $300K CSL would not sufficiently cover the injuries and damage, as they totaled $375K. However, a 100/300/100 SLL policy would effectively cover all injuries ($285K) and property damages ($90K). In the previous examples, you can understand how each type of limit can have both positive and negative features. Additionally, most carriers charge a higher premium for a CSL, which may sway an insured away from choosing it for
their coverage limit. The SLL will still provide adequate coverage, usually at a lower cost, but may result in liability coverage concerns. A solution to this type of coverage issue can be attained with the purchase of an Umbrella Policy, sometimes referred to as an Excess Liability policy (“ELP”). An ELP will extend your auto (and homeowners) insurance liability limits beyond their maximums. Oftentimes, a base ELP will contain a $1 million limit, which may assist in coverage in the event of a costly accident. It is always best to seek the advice of your local insurance professional in determining the most effective coverage limits for you and your family. He or she can help you understand your personal risks, analyze your options, and help you choose a liability limit type in your policy that best suits your specific needs. Michael Vitale, Licensed Insurance Professional for Auto, Home, Life, Medicare Supplement, and Disability Income Insurances.