What Is Split Limit Coverage and How Does It Work?

Split limit coverage defines the maximum financial protection an insurer provides for damages resulting from an incident. This structure is frequently found in auto liability insurance. It establishes a predefined ceiling on payouts for bodily injury and property damage claims.

Understanding the Components

Split limit coverage breaks down into three numbers, often presented as 25/50/25. The first number represents the maximum amount, in thousands of dollars, the insurer will pay for bodily injury liability for any one person injured in an accident. This sets a cap on the payout to a single claimant.

The second number indicates the total maximum amount, in thousands of dollars, the insurer will pay for all bodily injuries sustained by all parties in a single accident. This serves as an aggregate cap for all personal injury claims from one incident. The third number, also in thousands of dollars, specifies the maximum amount the insurer will pay for property damage liability. This covers costs for repairing or replacing damaged vehicles or other property.

How Limits Are Applied in Scenarios

Consider an insurance policy with a split limit of 25/50/25. In a scenario where an accident injures one person and damages their vehicle, the policy’s application becomes clear. If the injured person’s medical bills total $20,000 and their vehicle incurs $10,000 in damage, the insurer would pay the full $20,000 for bodily injury, as it is below the $25,000 per-person limit. The insurer would also cover the $10,000 for property damage, which is within the $25,000 property damage limit.

Now, imagine an accident where three people are injured and property damage occurs. If the first person’s medical bills are $20,000, the second person’s are $15,000, and the third person’s are $18,000, each individual claim falls within the $25,000 per-person limit. However, the total bodily injury claims sum to $53,000 ($20,000 + $15,000 + $18,000). Since the policy’s total bodily injury limit is $50,000 per accident, the insurer would pay only up to $50,000 for all bodily injuries, leaving a $3,000 excess.

If the property damage in this multi-person accident totals $15,000, the insurer would pay this amount, as it is less than the $25,000 property damage limit. Finally, in an accident involving only property damage, such as hitting a fence, if the repair cost is $8,000, the insurer would cover the full amount. This is because the $8,000 claim is within the $25,000 property damage limit.

The Boundary of Coverage and Policyholder Responsibility

Split limits define the maximum an insurance company will disburse for covered claims. The policyholder bears financial responsibility for any costs that exceed these predetermined limits.

For instance, if an accident results in $60,000 in total bodily injury claims, but the policy has a $50,000 per-accident bodily injury limit, the policyholder is liable for the remaining $10,000. Similarly, if property damage amounts to $30,000 but the policy’s limit is $25,000, the policyholder must cover the $5,000 difference. These limits are contractual caps that determine the policyholder’s out-of-pocket exposure in the event of a claim.