How Often Do Auto Accident Settlements Exceed the Policy Limits? Solved

How Often Do Auto Accident Settlements Exceed Policy Limits?

Auto insurance liability limits appear on your insurance cards as a series of three numbers, such as 25/50/15. The first number is the maximum individual bodily injury liability, the second is the maximum group bodily injury liability (injuries total per accident), and the third is maximum property damage liability. These numbers represent thousands of dollars, so a 25/50/15 policy would include $25,000 in individual bodily injury, $50,000 in group/total bodily injury, and $15,000 in property damage coverage.

Fortunately, car accident claims do not often exceed policy limits, even if the policy has the minimum liability coverage. The ranges of minimum coverage in virtually all states are as follows:

• $15,000 to $50,000 for per-person bodily injury
• $30,000 to $60,000 for per-accident bodily injury
• $10,000 to $25,000 for property damage

For a simple comparison, the average bodily injury claim for car accidents in 2018 was $15,785, and the average claim for property damage was $3,841, according to the Insurance Information Institute. Property damage claims are typically well within policy limits. In most cases, bodily injury claims also meet or fall below the per-person limits, and additional expenses can be met with the per-accident limits.

One of the most common auto insurance policy structures for drivers in the U.S. is 100/300/50, which amounts to $100,000 per-person bodily injury, $300,000 per-accident bodily injury, and $50,000 property damage. With this type of policy structure, it is highly unlikely that a claim from a car accident would exceed the limits.

Increasing Insurance Claims and Costs

While it is still very uncommon for settlement amounts to exceed policy limits, it is worth noting that both car accident frequency and claim severity have been increasing, and losses have exceeded premiums for the past decade. This has led to rising insurance costs in recent years as insurance companies try to mitigate their losses, but it is also an indication that purchasing sufficient auto insurance coverage is becoming even more important for individuals as expenses from collisions increase.

Understanding Policy Limits

Car insurance policies come with several different types of coverage. The most common of these are:

• Bodily injury liability: Including both per-person (individual) bodily injury and per-accident (group/total) bodily injury
• Property damage liability: Covers damage to vehicles and other property
• Uninsured/underinsured motorist: Covers the expenses if another person causes an accident and doesn’t have enough insurance to cover the damage:
  • Uninsured motorist (general): UM
  • Underinsured motorist (general): UIM
  • Uninsured motorist bodily injury: UMBI
  • Uninsured motorist property damage: UMPD
• Personal injury protection: Also referred to as PIP or no-fault, this coverage is usually provided as per-person and per-accident limits, and is used to cover things such as medical expenses, rehabilitation, disability, or loss of income caused by a car accident.

When viewing your insurance policy, the full names and amounts of your coverage are listed on the declarations page, which is usually the first page of the document. This page shows exactly how much coverage you have for each type, in whole dollar amounts. In addition to liability, UM/UIM, and PIP, other types of coverage a policy may have include:

• Comprehensive coverage, which provides coverage for damages to your vehicle from theft, vandalism, fire, and natural disasters
• Collision coverage, which provides additional coverage for multi-car accidents, as well as single-car collisions, such as if you hit a fence or a tree

The requirements for carrying each type of insurance coverage vary by state, but most states require at least bodily and property damage liability insurance. Some states also require uninsured motorist and personal injury protection. Generally, comprehensive and collision coverage are optional.

You can view a current list of minimum car insurance requirements by state.

What You Can Do If Your Claim Exceeds the Policy’s Limits

In a multi-car accident, liability typically rests with the driver of the vehicle that hits the other vehicle, although circumstances such as weather, road conditions, and negligence on the part of either driver can impact liability.

Once liability is established, you may end up filing a claim against the other driver’s insurance policy. Even if you are not liable, your own insurance company may also require you to file a claim, which can help you recover additional expenses. Although it is unlikely that the claim will exceed policy limits, you have a few options if this does occur.

Claims Filed Against Your Own Insurance Policy

If your own insurance policy does not cover your car accident claim, your options depend on whether your accident involved another driver, and whether the other driver is liable or partially liable for the accident. If you are fully liable for the accident, you may not have any recourse to cover the additional expenses, as your insurance company will not pay more than your policy limits.

One thing you can do is prevent this possibility by purchasing additional insurance coverage. The Insurance Information Institute recommends the common policy structure mentioned above — at least $100,000 in per-person bodily injury and $300,000 in per-accident coverage.

If UM/UIM and PIP coverage are optional in your state, you may also want to add these types of coverage to your insurance policy to protect yourself in the event of an accident.

Claims Filed Against Another Driver’s Insurance Policy

If you are in a car accident and the other driver is at fault, you’ll file an insurance claim with the at-fault driver’s insurance company. Although this doesn’t happen often, it may turn out that the other driver’s insurance does not completely cover your expenses. If this happens, your options are as follows:

• File a claim with your own insurance company. Your policy may be able to cover the additional expenses, especially if you have underinsured motorist coverage.
• Recover damages under an umbrella insurance policy.
• Recover damages personally from the at-fault driver, if they are cooperative and willing to admit fault.
  • If the at-fault driver is uncooperative, you may be able to file a claim in small claims court in an attempt to recover your expenses. However, if the at-fault driver is underinsured, they are not likely to have the ability to pay, even if the judgment is in your favor.
• File a lawsuit against the at-fault driver or another responsible party. If you have large expenses resulting from an accident that aren’t covered by the other driver’s insurance, you can work with a lawyer to sue the at-fault driver or another party who may have been liable for the accident (e.g., the city or road construction company for poor signage or inefficient barriers).

In Summary

With most auto insurance policy structures — even state minimums — it is unlikely that a claim settlement from an accident will exceed policy limits. Average claim payouts typically fall within the ranges of state minimum coverage and almost always fall well under recommended coverage limits. If your claim does exceed policy limits, you can try to recover your expenses through an umbrella policy (if applicable) or by filing a lawsuit against the at-fault driver.

For information about the statute of limitations for auto insurance claims, see our explanation of USAA’s auto insurance claim time limit policy.