What's the Difference between Split Limit Insurance and Single Limit Insurance?

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Insurance can be complicated, and there are different rules and conditions that come into play whenever you want to file a claim. And while you may be insured for a certain amount of money, that doesn’t necessarily mean that you’d have access to the full amount whenever an incident happens; at least, that would be the case if you have a split limit insurance policy.

Split Limit Insurance Explained

Split limit insurance policies are very common in the auto industry. They distribute the policy’s coverage into three categories: bodily injury per person, bodily injury per accident, and damages to property per accident.
This is also often expressed in numbers, for example, $200,000/$500,000/$100,000. This would mean this policy would be able to cover $200,000 for bodily injury per person, $500,000 for bodily injury per incident, and $100,000 for damages to property per accident.

Split Limit Insurance vs. Single Limit Insurance

The split limit coverage can be more limiting and often more confusing. For example, let’s refer to the previously mentioned policy: It has a limit of $500,000 per accident. Now, that sounds like as long as you don’t go over that amount per accident, you should be fine, right? Not quite.
The total coverage amount is still subject to the other categories. So, say you were involved in a car accident that caused you to suffer medical costs amounting to $250,000. While the total bodily injury limit per accident is $500,000, the limit per person is $200,000; therefore, you would be liable for the $50,000 difference. The same would apply if two people suffered medical costs of $300,000, the policy would only cover $200,000 per person, and there would be a difference of $100,000 per person remaining.
Now, if you had a single limit insurance policy, this wouldn’t be a problem. The total coverage amount would be $500,000, and it wouldn’t matter what kinds of costs you need to cover. You would be able to use the policy money to cover different categories depending on your needs without relying on a limit.

Which Is Better?

Of course, the single limit insurance is less of a hassle and more convenient. You can use the total of the coverage as you see fit; the policy adapts to your needs, not the other way around. Depending on the coverage, it might also be able to eliminate the need for an umbrella policy.
However, single limit insurance policies may not be for everyone. They often require you to pay premiums that are considerably higher than those of a split limit insurance policy. Because of this, people who don’t have a lot of assets to protect or who don’t want to pay for an elevated premium may want to stay away from single limit insurance policies. The investment might not be worth it if the cost is too high.
On the other hand, people with a lot of assets to protect may find single limit insurance policies useful, especially when they combine them with umbrella policies; this way, they’re adding an extra layer of coverage that allows them to be entirely covered.

The Bottom Line

Split limit insurance policies add additional limitations as to what you can cover in the case of an accident; these limitations can prevent you from using the full coverage amount of the policy.
On the other hand, single limit policies allow you to use the coverage as you see fit, making it possible to use the entirety of the policy. This also makes them perfect to be paired with umbrella policies for those people who have a lot of assets to protect.

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