What Does It Mean When You Have Liability Insurance Policy Limits of $250,000 / $500,000?

  I was in a car wreck yesterday.  It was probably my fault.  I looked at my automobile liability insurance policy and it says that I have liability limits of $250,000 / $500,000. What does that mean?

It means that for any one car wreck that is your fault your insurance company will pay a person injured in the wreck up to $250,000 in losses and damages they suffer.   If more than one person is injured in the wreck, the company will pay, on your behalf, up to $500,000 but no more than $250,000 for any one person. 

So, if one person was hurt in the wreck, the insurer will pay no more than $250,000 in damages.  If two people were hurt, the insurer will pay up to $500,000, but no more than $250,000 per person.  If three people were hurt, the insurer will pay up to $500,000, but no more than $250,000 per person. Note that each person who is injured does not automatically get $250,000 – they must demonstrate amount of their damages and can recover up to $250,000 each.

To the extent that a person injured in the wreck has claim worth more than $250,000 you are personally responsible for the amount of damages over $250,000 if the wreck was your fault.

Your policy also has a separate provision for paying property damage to the other driver’s car if it is determined that the wreck was your fault.