17 Apr 2015

DEFINITION of ‘Split Limits’
A provision of an insurance policy that states different maximum dollar amounts the insurer will pay for different components of a claim. A policy with split limits might pay $100,000 per person per incident for bodily injury, with a maximum of $300,000 per incident. If one person seeks $250,000 in damages for their injuries, the maximum the split limit policy will pay is $100,000, even if only one person s injured in the accident. The only way the split limit policy will pay the $300,000 maximum is if three different people each have $100,000 in claims.

The opposite of a split limit is a combined single limit, which limits the coverage for all components of a claim to one dollar amount. A combined single limit policy states that the insurer will pay up to, say, $300,000 dollars for a single claim; it doesn’t matter whether one person claims $300,000 in medical bills or whether three injured parties each claim $100,000 in medical bills. The combined single limit maxes out at $300,000 either way.

Split limit policies, since they offer a narrower insurance coverage, tend to have lower premiums. To get broader coverage, you can pay more for a combined single limit policy. Another way to obtain broader coverage than what’s offered under either type of policy is to purchase a personal umbrella liability policy. This policy will provide extra coverage after your automobile and home-owners insurance are exhausted. It will even cover some types of claims that neither policy covers. Regardless of which type of limit your insurance policy uses, an umbrella policy is a good idea to make sure you’re fully covered even when you’re held liable for a very expensive accident. If you’re found at fault for a five-car automobile accident and get sued for $2 million, the $300,000 policy will barely make a dent in how much you owe whether it’s a split limit policy or a combined single limit policy.

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