If you look at your automobile insurance policy’s Declarations Page, your Liability limits most likely look very much like one of these three choices:

At the gut level, a typical consumer sees ”100/300” and thinks “I have $300,000 worth of coverage.”  Which is correct, except that it’s not.  It’s more complicated than that.

Even though it’s known as ”100/300”, there is that third limit in there that people don’t vocalize when they use the shorthand reference.  In the case of this example, its $50,000, so ”100/300” is really ”100/300/50”, fully written out.  What do each of the three numbers mean?

• 300 is $300,000 the overall limit for each accident.  This is the total payout for Bodily Injury Liability damages that your insurance company will pay for a given accident (for example: medical bills of people injured by you in an accident that was your fault).
• 100 is a $100,000 individual payment limit for each person within a given accident.  While you may have $300,000 in total coverage, a single individual can be paid no more than $100,000 for bodily injury sustained in an accident.
• 50 is $50,000 for property damage caused during an accident.  For example, if you collide with another auto and it’s your fault, it is this coverage that pays for the other party’s auto repair or replacement.

Are Your Split Limits High Enough?

It is easy to concoct a scenario where the coverage limit described above is inadequate.  If, for example, you bash into (and total) a brand-spanking-new Corvette,  that $50,000 Property Damage limit is not going to cover the entire loss (hence the reason you should select a higher Property Damage limit.

What does the Property Damage Limit Really Mean?

As was previously stated, the “$100,000 each Person” part of “100/300” is a lesser sublimit inside of the $300,000 Bodily Injury coverage.  However the $50,000 Property Damage Liability limit is not.  As such, someone with 100/300/50 actually has $300,000 in Bodily Injury coverage and an added $50,000 in Property Damage Liability coverage.  That gives you a total of $350,000 in potential coverage.

Now the ‘split limit’ policy isn’t looking quite so bad.  Especially if you bump up your Property Damage coverage for what should be a very small charge.  100/300/50 isn’t quite enough, you should have 250/500/100?  Thats a total of $600,000 in potential coverage.

But before we start cranking up those limits on all of our cars, let’s consider the separate but related issue of your personal Umbrella insurance policy. If you have enough income and financial comfort to be owning multiple automobiles or a home chances are you have enough personal assets to make an Umbrella a necessity to protect your home and assets.

In making a decision on your auto insurance limits, you need to know at what point the Umbrella will pick up and start paying out.  You will have to read the Underlying Coverages portion of your own Umbrella to be sure, but chances are the number is  $250,000/$500,000/$100,000.

Next Step:

What you should do is read a copy of your auto insurance policy Declarations.  Decide if the limits you have now need improvement.  Next, dig out that Umbrella policy and read the Underlying Coverages section.  Call your agent with any questions!