Insurance

What is Policy Limits?

The maximum amount an insurance company will pay under a specific policy for a covered loss.

Definition

Insurance policies cap insurer exposure at the stated limits. For auto, common per-person limits are $25k–$100k for personal policies, $1M+ for commercial. Med-mal physicians often carry $1M–$3M per claim. Policy limits cap normal recovery; exceeding them requires going after the defendant personally or through bad faith claims.

How it applies in personal injury cases

Knowing policy limits early changes case strategy. A catastrophic-injury case against a $25k policy may not justify litigation costs unless UM/UIM stacking or commercial coverage exists. Settlement demands often start at policy limits when damages clearly exceed them.

Related terms

UM/UIM Coverage

Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage that pays plaintiff's damages when the at-fault driver lacks adequate insurance.

Joint and Several Liability

A doctrine that allows a plaintiff to recover the full amount of damages from any one of multiple defendants, regardless of each defendant's percentage of fault.

This entry is a plain-English reference for personal injury practice. It is not legal advice — consult a licensed attorney in your jurisdiction for the law applicable to your case.

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