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Q

What does the insurance policy mean with the numbers 10/20/20? What does the 10 mean, the 20 mean and the second 10? I don't understand.


A

The numbers 10/20/10 on your auto insurance policy are giving you the monetary limits on your liability coverages.

The first number 10 stands for $10,000.  This would be your maximum coverage for bodily injury liability for one person injured in one accident or incident. The second number, 25, stands for $25,000, and that is your maximum coverage for bodily injury liability for all persons injured in one accident. The third number, 10, stands for $10,000, and that is the maximum amount of coverage you have for property damage others sustained in one accident that you caused.

Therefore, if you have 10/20/10 the minimum liability limits are $10,000 for bodily injury liability (BI) per person for injuries you caused in an accident, $20,000 for all injuries in an accident (so your top limit for all injuries sustained by all people), and $10,000 fin property damage liability (PD) for property damage that you caused to others in an accident.

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If these are your state's minimum liability limits, then they should be enough for you to register your vehicle. However, they're on the low side if you happen to severely injure other people or hit multiple cars (or just one expensive vehicle) in an accident at which you are at fault for.  Low limits leave you, and your assets, at risk since you can be held personally responsible for amounts exceeding your car insurance limits.  (See “Do I have to pay if my liability limits are exceeded?”)

For example, in you're at fault in an accident where there are four people hurt, the most any one person can get for their medical bills is $10,000.  So all four in total would have to split the $20,000 top limit.  

If one person was severely injured, then that individual's medical expenses could easily exceed your per person limit of $10,000 for bodily injury liability -- meaning you'd be responsible for the excess medical bills your insurance didn't pay.

With one party already receiving $10,000 in this example, it means the other three's medical bills would be paid out of the remaining $10,000 left of your bodily injury coverage. If the total of their medical expenses exceeded your limit as well, then they also could come after you personally for this money.

If you hit numerous cars in your accident, then you would also likely exceed your $10,000 property damage liability limit. If you totaled out a couple of car say each worth $8,000 each than the other parties would have at least $16,000 dollars worth of claims and once again exceeding your property damage liability limits of $10,000 -- like the injuries did with your bodily injury coverage.

While financial circumstances do not allow all to raise their liability limits, it's recommended that you buy as you can afford. The insurance industry's recommended coverage amount is 100/300 for bodily injury liability coverage. This would give you coverage of $100,000 per person and a total of $300,000 per incident.  A limit of at least $50,000 for property damage liability coverage is recommended.

If you select limits that are too low, you could be putting yourself at risk financially. To make payments for injuries or property damages that exceed your limits you could be forced to liquidate property, savings, and other assets, or your future earnings could be attached. By purchasing Liability limits to account for both your current assets and future net worth, you can help protect yourself against this risk.

Determining if you need bodily injury liability insurance coverage above your state's minimum limits, will depend upon your own personal situation.

Figuring out car insurance can be confusing and we have a tool which will help you understand insurance types and limits better. Our online insurance coverage calculator will inform you about the auto insurance coverage that is right for you. Answer a few short questions and we'll give you some car insurance guidance on limits, deductibles and what kind of coverage you need.

For more information on car insurance coverages check out our articles page that contains titles such as How Much Car Insurance Should You Buy? and Types of Auto Insurance Coverage Explained.

Then follow this link to get a quote from an auto insurance specialist.


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