Combined Single Limit
Some car insurance companies offer a relatively rare plan called a combined single limit policy. It is important to understand the difference between this type of policy and the more common separate limits policy.
The latter contains separate limits for bodily injury and property damage. The policy will contain a line with three numbers separated by slashes. For example, 50/100/25 means that the liability claim limit is $50,000 per person, $100,00 per accident for bodily injury, and $25,000 to cover property damage.
A combined single limit policy will name a single dollar amount that is the limit paid for an accident. The money can be applied wholly or in part to bodily injury or property damage as needed. It can be divided among several claimants or only one.
As an example, assume that a driver owns a separate limit policy with the totals mentioned above. The policy will pay out a top limit of $125,00 per accident, but this is the cap, not the guaranteed amount.
If the policy owner is found to be at fault, his insurance company will pay a limit of $50,000 per person for up to two people. If one person suffers $30,000 in bodily injury and a second incurs $65,000 in medical bills, the insurance company will pay the entire $30,000 for the first claimant and $50,000 for the second.
The owner of the insurance policy is personally liable for $20,000 in medical bills for the second person. The insurance company was only responsible for $50,000 on each person and will not shift the money from one person to another. In addition, if the other driver’s car sustains $30,000 in property damage, the insurance company will pay $25,000 toward the claim, leaving the policy owner to pay the other $5,000 out of pocket.
Had the insurance policy been combined single limit for $125,000, the insurer would have paid the entire debt incurred. The money would have been shifted from person to person and to property damage as needed. The insurance company would have paid out to the cap of $125,000 in that particular accident.
If the total damages had been more, of course the policy owner would have been responsible for the rest of the payment. It is important, therefore, to buy as much insurance as practical in order to avoid large personal debts.
Most insurance companies offer separate limit policies. Combined single limit policies are sometimes hard to find. An independent agent can explain the benefits and drawbacks of both types of insurance and help find the type that best suits your needs.