Policy limits

What are policy limits?

Policy limits are the maximum amount an insurance company will pay under a specific policy for a covered claim, regardless of how much the actual damages genuinely exceed that figure.

They appear on the declarations page, generally expressed as two numbers for liability coverage, one for the maximum per injured person and a second, higher figure for the maximum across an entire single accident.

These limits create a hard ceiling on what a specific policy will pay, meaning a devastating injury can sometimes still be constrained by an inadequate policy limit regardless of how clearly the defendant was at fault.

Understanding the applicable policy limits early in a case is essential to realistically evaluating what a claim can actually recover, independent of the injury's genuine severity.

Why does this figure matter so significantly to case strategy?

Because it establishes a practical ceiling on recovery from that specific insurer, regardless of how catastrophic the injury or how clear the liability actually is.

• A minor policy limit may be far below the actual value of a serious injury claim
• Multiple injured people in one accident may need to share a single per accident limit
• Additional coverage sources, including underinsured motorist coverage, may fill part of the resulting gap
• Other potentially responsible defendants may carry separate, additional coverage
• An insurer's unreasonable refusal to settle within limits can itself create bad faith exposure

What happens when damages genuinely exceed the available limits?

The injured person generally can only recover the applicable limit from that specific policy, absent another source of coverage or a viable bad faith claim against the insurer itself.

This is precisely why identifying every potentially responsible defendant, and every applicable policy, matters so significantly in a case involving serious injury and correspondingly modest coverage.

Your own underinsured motorist coverage can sometimes fill this specific gap where the at fault driver's own limits prove genuinely inadequate to your actual damages.

How are policy limits actually determined in a specific case?

Through formal discovery, or sometimes through a direct request the insurer voluntarily honors, since the specific limits are not something you can simply guess or assume from general information.

A policy limits demand, properly documented and sent early, can also become significant in a later bad faith claim if the insurer unreasonably refused a demand genuinely within those limits.

Common questions

Can I recover more than the at fault driver's policy limit?

Potentially, through your own underinsured motorist coverage, or by pursuing other responsible defendants who carry separate coverage, depending on the specific circumstances.

How do I find out what policy limits the at fault driver actually carries?

This is typically obtained through your attorney via formal discovery or direct request, since insurers do not always volunteer this information without a proper request.

What if several people were hurt in the same accident?

They may need to share a single per accident limit, which can meaningfully reduce what any individual injured person ultimately recovers depending on how the available funds are allocated.