The numbers 10/20/10 on your auto insurance policy represent the monetary limits on your liability coverage.
- The first number, 10, stands for $10,000. This is your maximum coverage for bodily injury liability for one person injured in one accident or incident.
- The second number, 20, stands for $20,000. This is your maximum coverage for bodily injury liability for all persons injured in one accident.
- The third number, 10, stands for $10,000. This is your maximum coverage for property damage liability in an accident that you caused.
Bodily injury liability
The first two numbers represent the highest monetary amount that your insurance company will pay if someone is injured. For example, if you injure one driver in an accident that is deemed your fault, your insurance company will pay up to $10,000 for that person's medical bills. If the bills come out to $12,000, for example, you will be required to pay an extra $2,000 out of pocket.
If 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 on 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.
Property damage liability
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 cars, each worth $8,000, then the other parties would have at least $16,000 dollars worth of claims, exceeding your property damage liability limits of $10,000 -- like the injuries did with your bodily injury coverage.
Raising liability limits
If these are your state's minimum liability requirements, 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 for which you are at fault. Low limits leave you and your assets at risk; you can be held personally responsible for amounts exceeding your car insurance limits.
Read our guide on raising liability limits. You'll likely find that the extra security is well worth the added cost on your car insurance rate.
While financial circumstances do not allow everybody to raise their liability limits, it's recommended that you buy as much car insurance as you can afford. The insurance industry's recommended coverage amount is 100/300/50: $100,000 per person and $300,000 per incident for bodily injury and $50,000 for property damage liability coverage.
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.
To get a recommendation on what liability limits to buy, as well as whether you need optional collision and comprehensive coverage, use our "How Much Car Insurance Do You Need?" tool.