Advantages and Disadvantages of Single Limit Liability

Single limit liability is a newer approach to auto insurance liability coverage. This method approaches accident claim payouts from a “large pot” concept and has both advantages and disadvantages for the policy holder.

What Is Single Limit Liability Coverage?

Single limit liability coverage is auto insurance that provides one flat rate amount for coverage limits. For example, a policy owner may choose total per incident liability coverage of $300,000. This amount would include any and all claims for a single accident for bodily injury and property damage. Also, the limit would be applied for everyone involved in the accident, so that everyone would share in the limit of $300,000 in our example.

Single Limit Liability versus Split Limit Liability Coverage

While single limit liability auto insurance coverage provides one limit cap over an entire accident incident, split limit liability coverage divides the coverage limits up over 3 areas—one amount for bodily injury per person, one amount for bodily injury for the accident and one limit for property damage for the incident.

Using the example above, the single limit liability amount is $300,000 for the entire incident. However, with split liability coverage, the liability limit caps might be $100,000/$300,000/$100,000. This breaks down to $100,000 medical bodily injury coverage per person, $300,000 bodily injury coverage for the entire accident and $100,000 total property damage limits.

Advantages of Single Limit Liability Coverage

For individuals with assets such as a home or business, a single limit liability policy can have several distinct advantages. Very often, if you have assets to protect from potential law suits, you will automatically carry an additional umbrella insurance coverage, which is an added expense.

However, a single limit liability coverage policy virtually eliminates the need for an umbrella policy to protect from auto insurance law suits. This is because having a single “pot” for claims for an accident enables an insurance carrier to divide the entire limit amount as needed according to the related claims. Therefore, if, for example, an accident results in a high amount of property damage but very little bodily injury, the bulk of the claims will be dedicated toward property damage claims payouts. In many cases, carrying a single limit liability coverage policy will actually result in limits that are more than adequate to cover any claims that result from an accident. This is in contrast to split limit liability coverage, which very often results in a gap between actual claims and limits on the coverage. The result of this situation is very often a personal injury law suit against the policy holder in an attempt to recoup any unpaid expenses, placing home and businesses at risk.

Disadvantages of Single Limit Liability Coverage

The primary disadvantage of single limit liability coverage is that it is more expensive than split limit coverage. For individuals with no assets to protect and who wish to avoid higher auto insurance premiums, the benefits of a single limit liability policy will probably not outweigh the benefits enough to justify the higher premiums.

Another disadvantage to a single limit coverage policy is that resolution of claims may take longer, particularly in especially large accidents or ones that involve several different claimants. Since all of the claims are being pulled from a single limit amount, the insurance company may require that all claims be submitted before settling and closing out the case.