A lot of people assume that if someone else causes an accident, that person’s insurance will cover everything.
Unfortunately, that is not always how it works.
In a personal injury claim, the amount of insurance coverage available can make a big difference. Even if your medical bills, lost wages, pain and suffering, and other damages are worth more than the available coverage, the insurance company usually does not have to pay more than the policy limit.
What are insurance policy limits?
An insurance policy limit is the maximum amount an insurance company will pay for a claim.
Most liability insurance policies have two main limits:
- Per-person limit: the most the insurance company will pay for one injured person
- Per-accident limit: the most the insurance company will pay for everyone injured in the same accident
For example, if a policy has a $50,000 per-person limit, that is usually the most available for one person’s injuries under that policy.
If a policy has a $100,000 per-accident limit and multiple people were injured, that $100,000 may have to be shared between everyone with a claim.
Can the insurance company pay more than the policy limit?
Usually, no.
If the at-fault party has a $25,000 policy limit, the insurance company is generally only responsible for paying up to $25,000 from that policy.
That can become a serious issue when someone has major injuries, surgery, missed work, or long-term medical care. The value of the claim may be much higher than the available insurance.
What if the damages are higher than the insurance coverage?
Other coverage may apply, depending on what happened.
Possible sources of additional coverage may include:
- Underinsured motorist coverage, also called UIM or SUM: is optional coverage you can purchase with your own auto insurance company to protect you in the event that the at-fault driver has less insurance than yours and is insufficient to cover your damages
- Uninsured motorist coverage: may apply if the responsible person has no insurance at all.
- Umbrella insurance: may provide additional coverage beyond a standard insurance policy
- Other responsible parties: may apply if more than one person, business, or policy contributed to the injury
This is why UIM/SUM coverage can be so important. It helps protect you from being limited by someone else’s low insurance limits after a serious crash. When possible, carrying higher UIM/SUM coverage may give you another layer of protection if the at-fault driver does not have enough insurance to cover your injuries.
What are the auto insurance minimums in New York?
New York requires drivers to carry minimum liability insurance. These minimums are often much lower than the cost of serious injuries.
The minimum bodily injury liability coverage in New York includes:
- $25,000 per person for injuries
- $50,000 per accident for injuries involving multiple people
- $10,000 for property damage
New York drivers must also carry no-fault coverage, also called Personal Injury Protection or PIP. This usually provides at least $50,000 per person for medical expenses and lost wages, no matter who caused the crash.
In a serious accident, these limits can be reached quickly.
Should you accept a policy-limit offer?
Not without understanding whether other coverage may be available.
A policy-limit offer means the insurance company is offering the maximum amount available under that policy. However, that does not always mean it is the only source of recovery.
Before accepting an offer, it is important to know whether there may be:
- Additional insurance policies
- UIM or SUM coverage
- Umbrella coverage
- More than one responsible party
- Other sources of compensation
An attorney can help identify available insurance coverage, review policy limits, and determine whether other parties or policies may apply. They can also handle communication with the insurance company before you accept an offer that may affect your ability to recover additional compensation.
The main takeaway
If your damages are higher than the available insurance, the insurance company usually does not have to pay more than the policy limit.
That does not always mean the claim is over.
For anyone injured in an accident, the question is not only how much insurance the at-fault party has. It is also whether other coverage may be available, whether more than one party may be responsible, and whether all possible sources of compensation have been identified before accepting an offer.