Costs Above Policy Limits

Posted in Auto Insurance

February 26th, 2009

If you own a car and drive it in the United States, you need auto insurance. One aspect of auto insurance that everyone should be familiar with are the “costs above policy limits.”

Costs above policy limits refers to any and all amounts of money that you might have to pay once your auto insurance coverage has been used up. Let’s say you have auto insurance with a cap of $25,000 for collision repairs. One night you’re driving down a snowy road, and you spin out on a patch of ice and slam into a telephone pole. You’re fine, but your car is seriously damaged. You take it to the mechanic for an estimate, and it turns out the whole thing will cost you $30,000 to repair. The $5,000 over the auto insurance policy limit would be considered costs above policy limits. “Cost above policy limits” is, as you may have guessed, just another term for an auto insurance cap on benefits.

In general, the more you pay for your monthly premium, the less likely the chance that you will incur costs above policy limits. For example, if you pay $300 a month for your auto insurance, you will most likely have a high amount of coverage, meaning the insurance company will cover a higher dollar amount of your accident-related expenses than if you skimp on a lower monthly premium. It’s a trade-off – do you want to pay less on a monthly basis and have less coverage, or pay more every month, but have more coverage? If you pay more every month, you will be less likely to run into costs above policy limits.

For more information on costs above policy limits or any other aspect of automobile insurance, be sure to consult with an insurance industry expert.