Its not a simple - or even easy - choice
Your insurance policy limits are most likely set up in a format known in the insurance industry as "split limits". Your Liability limits probably look like one of these:
- $50,000 ea. person, $100,000 ea. accident, $10,000 property damage (a.k.a. "50/100")
- $100,000 ea. person, $300,000 ea. accident, $50,000 property damage (a.k.a. "100/300")
- $250,000 ea. person, $500,000 ea. accident, $100,000 property damage (a.k.a. "250/500")
What the average person understands is that if they have "100/300" coverage, they have $300,000 in insurance protection. This is not entirely correct. The "100" part needs to be understood (as does the often-unspoken-of third limit in the coverage).
Lets say you have 100/300/50 coverage. If we break that down here's what we get:
- 300 is $300,000 for each accident. This is the total payout for Bodily Injury Liability damages (medical bills for someone who is injured by you) that your insurance company will pay for a given individual incident.
- 100 is $100,000 for each person within a given accident. While you may have $300,000 in total coverage, a single individual can be paid no more than $100,000 for bodily injury sustained in an accident.
- 50 is for property damage caused during an accident. If you collide with another auto, it is this portion of your insurance coverage that pays for that auto's repair or replacement.
Split Limits Not Good Enough?
It is easy to concoct a scenario where the coverage limit described above - which is extremely common - is inadequate. If for example you bash into (and total) a brand-spanking-new Corvette, that $50,000 Property Damage limit is not going to cover the entire loss.
A Combined Single Limit is one solution to the above scenario. With CSL limits your Liability insurance limits look like this:
No sub-limits. Whatever needs it, gets it up to the policy limit of $300,000. Simpler to be sure, and that seems like a better way to do it, which is why such policies tend to be more expensive. But is it always better?
Not So Bad After All
Maybe not. Most articles describing Split vs. CSL limits stop right about here. Here is what is missing: Full discussion of the Property Damage limit. You see, while it is easy to understand that the "$100,000 each person" part of "100/300" is a limit within the $300,000 overall insurance limit, the Property Damage limit is not. It stands on its own. So someone with "100/300/50" actually has $300,000 in Bodily Injury coverage and an additional $50,000 in Property Damage coverage, for a total of $350,000 in coverage compared to the CSL policy's total of only $300,000.
Now the 'split limit' policy isn't looking quite so bad. Especially if you can bump up your Property Damage coverage for what is likely a negligible charge. if 100/300/50 isn't quite enough, how about 100/300/100, which is now a total of $400,000 in coverage?
Next lets also consider the separate issue of whether you have a personal Umbrella policy. Most people do. At what point will the Umbrella pick up where your auto insurance policy leaves off? You will have to read the Underlying Coverages portion of your own Umbrella to be sure, but chances are good the number is either $100,000/$300,000/$50,000 or $300,000 CSL (both are commonly accepted within the policy). In other words, if your Umbrella picks up and starts paying out at $100,000 (each person), $300,000 (each accident), or $50,000 (Property Damage) ... why pay the extra money for $300,000 CSL, or even for more Property Damage coverage? Your umbrella is already doing that job (and much more).
Your Next Step
Don't look to this article to answer your specific insurance needs... What it should do instead is get you to pick up and read a copy of your auto insurance policy Declarations. Decide if the limits you have now need improvement. Next, dig out that dusty copy of your Umbrella policy and read the Underlying Coverages requirements. You may find you are paying for some of your auto insurance coverage twice. Its a scenario we run into entirely too often and in the industry its known as having "overlapping coverages".
One thing can be said for certain: While its no fun to read through an insurance policy, doing so is not as bad as you might think. What you learn can save you a lot of money -- and possibly a lot of heartache.