What is a Combined Single Limit?

If you have a standard auto insurance policy (such as State Farm, Farmers, All-State etc.), your insurance policy limits are set up in a format known in the insurance industry as "split limits". Your Liability limits probably look like one of these:

• $50,000 ea. person, $100,000 ea. accident, $10,000 property damage (a.k.a. "50/100")
• $100,000 ea. person, $300,000 ea. accident, $50,000 property damage (a.k.a. "100/300")
• $250,000 ea. person, $500,000 ea. accident, $100,000 property damage (a.k.a. "250/500")

Let's say you have 100/300 limits. You cause a bad accident:

1. You wreck the other driver's brand new $100,000 Mercedes Benz.
2. The other driver is hurt and needs $29,000 worth of medical care.
3. The other driver's passenger needs $150,000 in medical care.

The total cost to settle the bodily injury and property damage caused by the accident is $279,000. This is what you have insurance for: to protect you from financial ruin in case of disaster.

You're in for a surprise if you think your $300,000 worth of insurance is going to cover the $279,000 that must be paid. Here's how it is going to work:

• You have a "per accident" insurance limit of $300,000
• You also have property damage and per person "sub-limits" which you probably never gave much thought to.

Here's what winds up happening:

1. The totalled Mercedes Benz is considered property. Since you have a Property Damage sub-limit of $50,000, that means your insurance will only pay for half of the cost of replacing the car. You're responsible for $50,000.
   
2. The more seriously injured person's $150,000 worth of bodily injury won't be paid entirely, either. Remember the $100,000 "each person" limit? Which will require you to pay another $50,000.
   
3. The less-seriously injured person's injuries are paid in full as they fit under the $100,000 per person sub-limit.
   
4. Even though you have a total policy coverage limit of $300,000, your insurance company is only required to pay $179,000. You're responsible for the remaining $100,000. While the other party may have Uninsured / Underinsured Motorist coverage that will pay this $100,000 amount to them, expect their insurance company to take you to court afterwards to collect as much of that $100,000 as they can get their hands on.

Combined Single Limits

If you have a Select policy, those three limits shown above look like this:

• $100,000 each accident
• $300,000 each accident
• $500,000 each accident

Rather than having three limits, you have one combined, single limit. In the disastrous scenario above, a combined single limit policy would pay the entire cost of the accident.