Insurance Policy Limits Not Enough to Cover Losses in Your Personal Injury Claim

When an individual is involved in a car accident, insurance is often the safety net to cover damages. However, there are cases where the policy limits of the at-fault party’s insurance aren’t sufficient to compensate for all of the injured person’s losses.

This situation can lead to challenges in receiving full compensation, making it essential to understand one’s rights and potential avenues for recovery. This brief overview will delve into scenarios when insurance policy limits fall short and what options might be available for claimants.

Understanding Insurance Policy Limits

Every insurance policy, be it for auto insurance or bodily injury coverage, operates under a preset coverage limit, which dictates the maximum amount the insurer will pay out in case of a claim. Understanding how insurance policy limits work is paramount, especially in personal injury cases.

At the heart of every insurance policy is a contract between the insured (policyholder) and the insurer (insurance company). This contract, which often includes the declarations page of your insurance policy, spells out the maximum amount, or the limits of your policy, that the insurance company will pay in the event of a specific occurrence, such as a car accident or bodily injury claim.

For instance, in the realm of car insurance coverage, if an individual is involved in a car accident and is found to be at fault, their liability insurance policy will kick in to cover the damages. However, if the costs of the damages or injuries exceed the limits set in the policy, the at-fault party may have to pay out-of-pocket or risk legal implications.

In situations where the damages from an accident are anticipated to exceed the policy limit, a victim or their personal injury attorney may send a policy limit demand letter to the at-fault party’s insurance carrier. This letter formally requests the insurance company to pay the maximum amount stipulated in the driver’s insurance policy.

Settlements and Insurance Coverage

The process of reaching a settlement, especially in a personal injury case, is knitted with understanding insurance coverage limits. A settlement typically results when both parties in a personal injury case agree on a compensation amount, often to avoid the costs and uncertainties of a trial.

In many cases, especially those involving bodily injury or extensive personal property damage, settlements can often approach or even exceed the policy limits of the at-fault driver’s insurance. When this happens, several challenges and considerations arise.

Firstly, if the value of a personal injury claim exceeds insurance limits, the insurance company is generally only obligated to pay up to the policy limit. Anything beyond that might have to be sourced from the at-fault individual’s assets or other insurance policies they hold, like umbrella policies.

For those seeking compensation, it’s advisable to work with an experienced personal injury attorney who can navigate the details of insurance claims, especially when trying to collect injury compensation beyond the set policy limit. They can assist in ensuring that demands in a personal injury case are met and that the insurance company acts in good faith.

However, it’s not always smooth sailing. There are instances where an insurance company may refuse to pay a reasonable claim, alleging that the demands exceed the policy’s limits, even when it’s clear that the damages go beyond those limits. Such situations might lead to a bad faith claim, accusing the insurance company of not adhering to the spirit of the agreement.

What Happens When Your Personal Injury Exceeds Insurance Coverage

It’s not uncommon in personal injury law for accident settlements to exceed the policy limits. If the injury compensation required is in excess of the policy limits, victims might need to seek compensation beyond insurance policy limits. This can mean looking at other sources, such as the defendant’s personal property, or even initiating a personal injury lawsuit against the defendant directly.

Navigating Beyond the Limits: Challenges and Solutions

Challenges with Insurance Companies

 If an injury settlement exceeds the policy limit, it does not always guarantee that the insurance company pays the full amount. If an insurance company won’t pay a reasonable policy limits settlement demand, claimants might allege an insurance bad faith. Essentially, this implies that the insurance company is not acting in good faith by refusing to pay what should be a reasonable insurance claim.

Strategies for Collecting Beyond Policy Limits

  1. Umbrella Policies: These are types of insurance policies that offer additional liability coverage beyond standard auto insurance policies. If the at-fault driver has an umbrella policy, it can be a source to collect personal injury damages beyond their regular car insurance coverage.
  2. Leveraging Personal Injury Attorneys: An experienced personal injury lawyer is invaluable when filing a claim to try and collect injury compensation beyond the liability coverage limit of the defendant’s insurance policy. They can help craft a strong personal injury claim, negotiate with insurance carriers, and provide advice on the next steps if the insurer’s offer is not satisfactory.
  3. Taking Legal Action: If all else fails, and if the insurance company is responsible for acting in bad faith or the defendant’s insurance policy limits aren’t enough, a personal injury lawsuit can be filed. Here, you’re not just limited to the at-fault driver’s policy limits but can potentially claim against the person’s insurance or even their personal assets.

Multiple Insurance Sources

In some situations, especially in multi-car accidents, more than one insurance policy might be tapped for compensation. For example, if the at-fault driver’s insurance policy limits are reached, a victim could potentially look at their own underinsured motorist coverage.

While insurance policies offer a structure for compensation in the aftermath of an incident, they don’t always guarantee full compensation for a victim’s losses, especially when injury compensation exceeds insurance limits. By understanding how policy limits affect a personal injury settlement and knowing the routes to take when a settlement exceeds these limits, victims can better position themselves to recover the compensation they rightfully deserve.

The Interplay Between Insurers and Policyholders

In the complex landscape of personal injury claims, one crucial relationship stands out: the dynamic between insurers and policyholders. When you file an insurance claim, the first thing you’ll encounter is the defined terms of your coverage. One of the most crucial terms is the policy limits in insurance. For example, auto insurance policy limits stipulate the maximum amount an insurer will pay following a car accident.

Understanding these limits is essential, not just for the insurer but also for the policyholder. An insurance company may also adjust these limits based on the risks associated with the policyholder, which might lead to higher premiums. On the flip side, policyholders must ensure they include in their policy limits adequate coverage for potential accidents, especially if they reside in areas prone to certain risks.

In instances where accident settlements exceed the policy, tensions between insurers and policyholders can rise. While it’s in the best interest of an insurance company to ensure that the policy limits are enough to cover damages, sometimes these limits fall short. When this happens, the policyholders may find themselves financially exposed, especially if they’re at fault.


The complications of insurance, especially where policy limits come into play, necessitate a well-informed approach from both claimants and policyholders. Whether it’s understanding what to include in your policy limits or knowing when to seek injury compensation beyond the insurance policy, being knowledgeable is important. Always remember, while an insurance company’s goal is to operate within its set parameters, it can sometimes be a reasonable ally in ensuring fair compensation. Seeking guidance, whether from a car accident attorney or thorough research, can empower individuals to make informed decisions and navigate the intricate dance of insurance claims effectively.

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