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You’ve been seriously injured in a crash that wasn’t your fault. Medical bills are piling up, you can’t work, and you’re facing months of recovery. The at-fault driver’s insurance finally makes an offer—but the amount doesn’t come close to covering your actual losses. What happened? You’ve just run into the harsh reality of policy limits.
Below, our friends at Warner & Fitzmartin – Personal Injury Lawyers explain how policy limits can cap injury compensation.
What policy limits mean
Every auto insurance policy has maximum amounts the insurer will pay for injuries and damages. These caps are called policy limits, and they’re the ceiling on what you can recover from that particular insurance policy—no matter how severe your injuries or how clear the other driver’s fault.
Experienced motorcycle accident lawyers know that most states require drivers to carry minimum liability coverage, but those minimums are surprisingly low. According to the Insurance Information Institute, most states follow a 25/50/25 structure. Here’s what those numbers mean:
- $25,000 maximum per person for bodily injury
- $50,000 maximum per accident (total for all injured people)
- $25,000 maximum for property damage
Those figures might’ve made sense decades ago, but they’re wildly out of step with today’s medical costs and vehicle repair expenses.
Why minimum coverage isn’t enough
According to the Insurance Information Institute, the average auto liability claim for bodily injury was $26,501 in 2023—a figure that already exceeds the minimum coverage limits required in most states.
And that’s just an average. If you’ve suffered serious injuries—broken bones, traumatic brain injury, spinal cord damage—your actual costs can easily run into six figures. Emergency surgery, hospital stays, rehabilitation, lost wages, and ongoing care add up fast. A $25,000 policy won’t make much of a dent in a $200,000 medical bill.
What happens when limits fall short
When someone’s policy limits can’t cover your damages, you’ve got a problem. The insurance company will pay up to their limit and then they’re done. They’re not obligated to pay a penny more, even if your losses are catastrophic.
The at-fault driver becomes personally responsible for the remaining balance. But here’s the thing—most people don’t have substantial personal assets to tap into. You might win a judgment for the full amount you’re owed, but actually collecting that money is another story entirely.
Bad faith when insurers refuse reasonable settlements
Sometimes an insurer knows their policyholder is clearly at fault and that your damages far exceed the policy limits. If you offer to settle within those limits and the insurer refuses, then you recover more later, they can be held liable for bad faith. But proving bad faith is tough, and it doesn’t help you pay your bills in the meantime.
What are your options when limits aren’t enough?
You’re not necessarily out of luck if the at-fault driver’s policy limits fall short. Here are some possibilities:
Look for umbrella policies. Some drivers carry umbrella coverage that kicks in after their primary liability limits are exhausted. These policies can provide an additional $1 million or more in coverage.
Tap your own underinsured motorist coverage. If you have UM/UIM coverage on your own policy, it can help cover the gap between the at-fault driver’s limits and your actual damages. That’s why insurance agents recommend carrying UM/UIM coverage equal to or greater than your liability limits.
Find multiple liable parties. Depending on the circumstances, more than one party might share responsibility for the crash. A trucking company might be liable along with their driver. A bar might share liability if they overserved a drunk driver. A manufacturer might be on the hook if a vehicle defect contributed to your injuries. Each additional defendant potentially means another insurance policy—and higher total limits.
Go after personal assets. If the at-fault driver has significant personal wealth, you might recover additional damages beyond their insurance limits. But this is rare. Most judgment-proof defendants don’t have assets worth pursuing.
Protecting yourself before an accident happens
The best time to think about policy limits is before you’re in a crash. Here’s how to protect yourself:
- Don’t rely on state minimums. Carry as much liability coverage as you can reasonably afford. The difference in premium between minimum coverage and much higher limits is often surprisingly small.
- Max out your UM/UIM coverage. This protects you when the other driver is uninsured or underinsured—a disturbingly common scenario.
- Consider umbrella coverage. For a relatively modest premium, umbrella policies provide an extra layer of protection above your auto policy limits.
- Know what you’re buying. Review your policy limits now. If you’re carrying state minimums, you’re probably underinsured.
The bottom line
Policy limits are the harsh reality of the insurance world. They cap what you can recover, regardless of your actual damages, and they’re often far too low to provide meaningful protection. Understanding these limits—and making sure you’re not relying on inadequate coverage—can make the difference between financial recovery and financial ruin after a serious crash.
