What is the difference between 25/50/25and 250/500/250

When you review your auto insurance renewal, are you just focusing in on your total price or are you looking at the limits of liability that you have? Large national insurance carriers are spending massive amounts of money on advertising that only focus on price. Sure, you can always pay less for your insurance. However, what could this cost you at  the moment you have a liability loss?

Surprisingly, most people do not understand what the liability limits they have purchased represent. We are only going to look at a split limit liability policy in this example. So lets say you decide to purchase only what the State of Ohio requires you to have to legally operate an automobile. Those limits are 25/50/25 and here are what these numbers represent.

The first 25 represents the maximum your policy will pay for injuries you are liable for in an accident. The 25 represents $25,000 per person. The second number represents the maximum your policy will pay per accident for injuries you are liable to others per accident, $50,000. The last 25 is the limit this policy will pay for property damage you are liable for to others, you got it $25,000.
Very cut an dry.

So, for example, if you have a policy that is at state minimum coverages and you then you have a small accident. You’ve injured 3 people and damage some property. Each person went to the Urgent Care and were treated for minor injuries. As long as no single person seeks treatment greater than $25,000 and the three people all together do not seek treatment collectively that exceeds $50,000, you would have enough coverages to cover your liabilities for the injuries you caused. Their car only had minor and should be repaired for well under your $25,000 limit.

What if you have a much larger accident and people are more severely injured? For instance, the first responders call in a medical fight to take an injured person to a faraway hospital. Or what if a person misses work due to needed therapy appointments for recovery? What if the injured person is suddenly represented by a personal injury attorney whose firm is made famous by their high settlements? Will state minimum coverage be enough?

The limits of liability listed on your declarations page of your insurance policy is the maximum your policy will pay out. If your liability for a loss exceeds these limits the insurance carrier stops paying. Now the liability now falls on you to complete the compensation for your damages. 

Has your current limits of liability kept up with inflation? By using an inflation calculator, we discovered $193,485 today is the save purchase power of $100,000 in 1990. Do you think higher limits like 100/300/100 is the correct limits for you? Does 250/500/250 sounds much more reasonable now? Perhaps you should purchase an additional $1,000,000 liability policy to increase your liability limits because you own property and have a savings?

So in the moment your insurance renewal arrives, are you just looking at the price?

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