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What Happens When a Car Accident Exceeds Insurance Limits?

What Happens When a Car Accident Exceeds Insurance Limits?

For millions of Americans, getting behind the wheel of a car is an everyday act. But the moment you turn the ignition, you also accept all the risks – big and small – of being on the road. Among the most unfortunate risks of driving a car or riding as a passenger is the risk of getting into a car accident. This risk creates the need for car insurance, which is mandatory in nearly all states.

Auto insurance is like a safety net. It’s there to help you bounce back when the unexpected happens. However, not all insurance policies are created equal. One crucial yet often misunderstood aspect is car insurance policy limits and, more specifically, what happens when a car accident exceeds insurance limits.

When you need to file an insurance claim against an at-fault driver following a crash, many issues can arise and cause roadblocks, including insurance policy limits. The best thing you can do is seek the support of a car accident lawyer who can handle the entire claim process.

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What Is Car Insurance?

Car Insurance PolicyAt its core, a car insurance policy is a contract between you and your insurance provider. When you get insurance, you agree to pay premiums, the amount paid each month (or, in some cases, each year). In exchange for regular premiums, the insurer agrees to cover certain types of financial losses related to your vehicle or those of a third party in the case of an accident.

However, the specifics of what exactly is covered can vary significantly depending on the type of policy you have, be it liability insurance, collision coverage, comprehensive insurance, personal injury protection, or underinsured/uninsured motorist coverage. Each covers various risks, from damage to property to physical harm to you or other drivers.

All but two states (Virginia and New Hampshire) have some form of car insurance requirement. For example, all vehicles operated or parked on the state’s roads must be insured in California. Californian motorists are legally required to purchase a liability insurance policy that meets the state’s minimum requirements. However, despite the law, approximately 17 percent of all motorists in the state are uninsured.

What Is a Car Insurance Policy Limit?

Simply put, car insurance policy limits are the maximum amounts your insurance company will pay for a particular type of claim within a specific period. Most policies have two types of limits – per person and accident. In California, the minimum requirements for liability insurance are $15,000 per person and $30,000 per accident.

In the case of a debilitating car crash, for instance, with a $15,000 per person limit and a $30,000 per-accident limit, the insurance company won’t cover more than $15,000 for one person’s injuries and no more than $30,000 for all injuries in the accident.

These policy limits are not one-size-fits-all. They can be adjusted depending on your needs and budget. A higher limit generally means more comprehensive coverage but may come with a more substantial premium. Car insurance policy limits are put in place for a reason. And it’s not about insurance companies holding back on you. It’s about managing risk. Insurance companies need to quantify and limit potential losses to remain financially solvent while maintaining the ability to cover future claims.

Policy limits are also in place to curb moral hazards, which are dishonest behaviors that might arise when individuals are protected from the full consequences of their actions. Without policy limits, individuals might be less cautious on the road, knowing that their insurance will cover any and all expenses resulting from an accident of any severity.

How Car Accident Settlements Are Calculated

You will likely have many concerns and questions as a car accident victim. One of them is probably, “How much money can I receive as compensation for my damages and losses?” To answer this question, you need to understand how settlements are calculated.

Unfortunately, no such thing as the average car accident settlement would apply to all (or almost all) injured victims. Everyone’s circumstances are unique, so the amount paid to the victim differs from one accident to another. However, statistics show that the average cost of a disabling injury for a victim of a car crash is $155,000 and $40,000 if the injury is “evident.”

As a rule of thumb, victims who sustain minor injuries such as bruises are offered far less money as part of the settlement than those who suffer severe and permanent injuries. A settlement after a car accident is calculated based on many variables, including but not limited to:

  • Medical expenses
  • Loss of income
  • Diminished earning capacity
  • Emotional distress
  • Pain and suffering
  • Property damage

If you are unsure how much money you can get after a car crash, you should discuss your situation with a car accident attorney. An experienced attorney can assess the full extent of your damages and help you understand the ins and outs of your specific policy. Do not settle for less or accept the insurance company’s denial because the insurer says the car accident exceeds insurance limits. Consider talking with an attorney first.

Is It Possible for a Car Accident to Exceed Insurance Limits?

Dealing with the aftermath of a car accident can be incredibly stressful. When the dust settles, the dollar amounts may start piling up faster than you can imagine. When reviewing your car insurance policy, the coverage limits outlined in the fine print can seem dauntingly low compared to the potential costs of extensive medical treatment, vehicle repairs, or legal fees.

Car accident injuries are often costly. If you incur $40,000 in medical expenses after a car accident and the at-fault driver carries the minimum liability insurance with a $15,000 per-person limit in California, you will have difficulty recovering the total amount through the driver’s insurance.

Car accident costs often exceed insurance policy limits when a victim suffers serious injuries or there are multiple injured victims. Not being able to seek full coverage from the liable driver can hinder your ability to get all the medical treatment you need, cover your bills and expenses, and allow you to move forward with proper support.

Instead of accepting this stressful situation, allow a car accident lawyer to explore possible solutions for you.

Understanding When Insurance Isn’t Enough

Insurance coverage is not limitless. If you are in a severe accident, the other driver’s insurance is often not enough to cover the total cost of medical bills, lost income, or property damage. This is especially true in cases involving catastrophic injuries or when multiple vehicles are affected.

You move into underinsured or uninsured motorist territory when faced with such a situation. These terms mean that the at-fault driver’s insurance policy’s financial coverage either does not exist (in the case of uninsured motorists) or cannot fully compensate for your losses (in the case of underinsured motorists). Fortunately, if you have found yourself in this uncomfortable position, fear not; there may be options to seek additional compensation beyond the insurance limits.

Options for Getting Compensation Above Policy Limits

When insurance isn’t enough, what options do you have as a victim to secure the compensation you need to recover and move on? Fortunately, the answer is “yes.” Here are some of the options to consider getting additional compensation when this happens:

Filing a Lawsuit Against the At-Fault Driver

If the cost of a car accident exceeds the at-fault party’s policy limits, it is common for the at-fault driver to be personally responsible for any additional damages. They may be required to pay out of pocket or have assets seized through a court judgment. A personal injury lawsuit can be an avenue to pursue additional compensation.

In these cases, a plaintiff seeks damages directly from the at-fault driver, often with the help of a car accident lawyer, to cover costs beyond what insurance provides. In cases where a lawsuit awards damages that exceed policy limits, the at-fault party may have assets that can be seized to fulfill the judgment. It can include real estate, savings, or future earnings.

Exploring Additional Liability

In some cases, another party may share responsibility for the accident, such as a government entity for a defective road condition, a vehicle manufacturer for a faulty vehicle part, or an employer if the at-fault driver was on the job. Pursuing these avenues can provide additional sources of compensation.

Strict claim requirements may apply when a government entity is liable. It may differ from state to state. In California, for example, administrative claims against the government must be filed within six months of the date of injury.

Always have your car accident lawyer identify whether additional parties might be liable for your injuries, as this can substantially increase the available insurance coverage.

Umbrella and Excess Liability Policies

These policies provide additional coverage once the primary policy limit is reached. They kick in when the damages exceed the regular policy’s ceiling and often provide a significant layer of protection.

Underinsured/Uninsured Motorist Coverage

You can file a claim with your insurance provider if a car accident exceeds insurance limits. Generally, this option is only available to those whose insurance policy includes uninsured/underinsured motorist (UM/UIM) coverage. As the name suggests, this type of coverage kicks in when the other driver involved in the crash either has no insurance coverage or their coverage is not sufficient to fully cover your losses. If you were not at fault, your premium will generally stay the same if you file a claim under the UM/UIM coverage.

How Can an Attorney Help When a Car Accident Exceeds Insurance Limits?

Consulting a car crash attorneyImagine this: you get a call or letter from the other driver’s insurance company telling you the policy has been exhausted and will not pay additional bills. This situation can be frustrating. You may think that you are on your own now and have no more recourse to get compensation for the expenses above policy limits.

However, do not lose hope. Work with a personal injury attorney to understand your options. Below are some of the ways an attorney can help when you have been in a car accident that exceeds insurance limits:

  • Investigating other sources of insurance. An attorney will investigate the crash to identify all possible sources of insurance. This can mean uncovering additional policies the at-fault party may have or finding avenues through the victim’s uninsured or underinsured motorist coverage.
  • Proving liability and damages. Attorneys are skilled in proving liability and demonstrating the extent of the victim’s damages. It is critical to obtain compensation that genuinely covers your losses. They can collect and present evidence that supports your claim, potentially influencing the insurance company to offer a settlement above the policy limit.
  • Seeking third-party liability. Your attorney can explore whether third parties, such as a government entity or vehicle manufacturer, contributed to the accident. For example, if a defective vehicle part was a factor in the crash, it may be possible to pursue a claim against the manufacturer.
  • Filing underinsured motorist claim. If the victim’s insurance includes underinsured motorist coverage, an attorney can assist in filing a claim against this policy, which may provide additional compensation.
  • Negotiating with insurance companies. Experienced attorneys understand the tactics insurers use to minimize payouts to victims. With this in mind, an attorney will represent your best interests when negotiating a settlement.
  • Litigation. An attorney can file a lawsuit for damages recovery when litigation is the only—and/or most effective—way to secure the compensation you need. Sometimes, the possibility of going to court can incentivize an insurer to settle for more than the original policy limits.
  • Structuring settlements. Sometimes, an attorney can structure a settlement to maximize your compensation. It can help you receive adequate funds for your losses.

Most car accident lawyers offer free initial consultations, which means you can get your questions answered without making a financial commitment. An attorney can guide you through the options and fight for additional compensation. Do not accept the insurer’s denial to cover your damages beyond insurance limits without first speaking with a car accident attorney.

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