Does your car insurance have split limits or a combined single limit?

You probably have split limits. It’s the most common type of automobile insurance coverage.

You may not have known that. Or what it means. Let me explain:

The state minimum insurance is represented as split limits: $25,000/$50,000/$15,000.

  • The first number represents the most an insurance company will pay out to any one individual that the insured injures in a car accident. This would be for bodily injury, pain and suffering and lost wages.
  • The second number represents the most an insurance company will pay out for the entire accident, regardless of how many people are injured.
  • The third number is the maximum the insurance company will pay for property damage — most commonly damage you cause to another person’s car. But it could also be a building, a road sign, a house or any other property damaged during an accident.

Nobody should carry state-minimum insurance limits, and we rarely allow people to purchase state-minimum insurance unless there is a very specific and legitimate reason.

Combined single limit (CSL) simply means you have one limit and both bodily injury and property damage will come from that pool of money.

If you have $100,000 CSL and you cause an auto accident where three people are injured and two cars are totaled, all injuries and property damages will come from the $100,000 limit — an amount that’s definitely better than state minimum insurance because, in a worst case scenario, $90,000 would be paid out with state minimum liability ($25,000+$50,000+$15,000). But, for this to occur, you would have had to caused bodily injury to two different people and do severe damage to a vehicle.

Another example. How does a $250,000/$500,000/$100,000 split limit compare to a $500,000 Combined Single Limit?

While on the surface, it appears that $250/500/100 is better because $850,000 could potentially pay out. But, in this case, I believe a $500,000 CSL better protects you and gives you more flexibility.

Why? Because most vehicles only have one occupant. If you hit a single-occupant vehicle, the maximum a $250/500/100 split-limit policy will pay out is $350,000 because the second number only comes into play if more than one person is injured.

Another example. If you hit a pedestrian, a $500,000 CSL would pay out up to $500,000 whereas a $250/500/100 split-limits policy would pay out a maximum of $250,000.

Many of our clients have $500/500/500 limits, which in every instance is better than or equal to $500,000 CSL.  However, the cost savings of $500,000 CSL is often enough to make one consider the pros and cons.

Property damage losses are normally less than $50,000 and rarely near $500,000.  So, if you figure that most property damage claims are under $50,000, the difference between $500/500/500 and $500 CSL might only be $50,000.  One way to alleviate this loss of coverage is by adding or increasing your umbrella policy.  A $500 CSL policy with an umbrella is always better than a $500/500/500 spit-limits policy without an umbrella.

So what’s better?  Split limit or combined single limit?  It just depends on the limits you’re looking at.  This can all be confusing. Questions about what kind of car insurance you should have? Give us a call at 303.922.1002and we’ll be happy to answer your questions and help you decide.